Feb 11, 2023
SEC Commissioner Blasts Agency Over Kraken Shutdown
The United States Securities and Exchange Commission (SEC) has been publicly criticized by one of its own commissioners, Hester Peirce, over its decision to shut down the crypto staking program of the crypto exchange Kraken in the United States.
In a statement released on Feb. 9, entitled “Kraken Down”, the commissioner voiced her disagreement with the SEC’s decision and argued that regulation by enforcement is not the most efficient or fair way of regulating the emerging crypto and web3 industries.
Peirce further suggested that the SEC should have initiated a “public process to develop a workable registration process that provides valuable information to investors” instead of shutting down a program that has served people well.
The statement was met with agreement from Coinbase CEO and co-founder Brian Armstrong, who tweeted that requiring businesses to register its staking services is a “disingenuous offer” as there is no clear path to registration.
On Feb. 9, the SEC announced that it had reached a $30 million settlement with Kraken, saying it failed “to register the offer and sale of their crypto asset staking-as-a-service program.”
Kraken said in a blog post that it would still offer staking services to non-U.S. customers through a subsidiary, but according to the SEC announcement, the firm is permanently banned from providing staking services to U.S. residents, even if they sought to register it with the regulator.
The SEC’s decision has sparked debate in the crypto and web3 space, with many questioning the regulator’s approach to the industry and its lack of guidance on the sale and promotion of Non-Fungible Tokens (NFTs).
In response to the SEC’s actions, Peirce proposed a “safe harbor” for token projects which are looking to build decentralized networks, in which the network developers would receive a three-year grace period where they were exempt from SEC legal action.
The proposal was well-received by the crypto and web3 communities, with many hoping that the SEC will take a more open and collaborative approach to the industry, rather than relying on enforcement actions to regulate it.
As the web3 space continues to grow, it is becoming increasingly important for the SEC to provide clarity on the sale and promotion of NFTs, as well as guidance on the best practices for NFT marketing and promotion.
In addition, the SEC should also provide guidance on the use of social media platforms, such as Twitter, to promote NFTs and provide advice on the best practices for NFT marketing agencies and web3 agencies.
The crypto and web3 industries are rapidly evolving, and it is essential that the SEC keep up with the pace of innovation and provide the necessary guidance and clarity to ensure that businesses and investors are able to safely and securely sell and promote NFTs.
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