<p>Cryptocurrency exchange, Kraken has reached a $30 million settlement with the US Securities and Exchange Commission (SEC) and agreed to end its <a href=”https://www.financemagnates.com/cryptocurrency/education-centre/what-is-staking-all-you-need-to-know-about-staking/” target=”_blank” rel=”follow”>crypto staking-as-a-service</a> platform for US customers.</p><p>Kraken Settles for $30 Million</p><p>Announced on Thursday, the settlement with Payward Ventures, Inc. and Payward Trading Ltd., <a href=”https://www.financemagnates.com/tag/kraken/” target=”_blank” rel=”follow”>two companies operating Kraken</a>, came as the US regulator accused the exchange of failing to register its <a href=”https://www.financemagnates.com/terms/s/staking/” class=”terms__main-term” id=”ebfdd4d9-00b3-41ff-bff5-878cd2eb105f” target=”_blank”>staking</a>-as-a-service program.</p><blockquote class=”twitter-tweet”><p lang=”en” dir=”ltr”>Settlements are not law. They’re a decision that the economics of settling are better than fighting, no more.The SEC thinks staking-as-a-service is a security. Kraken didn’t admit or deny either way.It may be a tough question, but the SEC hasn’t answered it either way today.</p>— Jake Chervinsky (@jchervinsky) <a href=”https://twitter.com/jchervinsky/status/1623792748464594944?ref_src=twsrc%5Etfw”>February 9, 2023</a></blockquote><p>Staking offers crypto holders rewards for locking up their cryptocurrencies with a <a href=”https://www.financemagnates.com/terms/b/blockchain/” class=”terms__secondary-term” id=”be18ed01-45fc-4044-b447-06802a10dbcd” target=”_blank”>blockchain</a> validator. Holders of the staked tokens receive rewards in newly mined cryptocurrencies but lose control over their original holding until they are staked.</p><p>According to SEC, Kraken launched staking-as-a-service in 2019 and advertised annual investment returns of as much as 21 percent. However, the Kraken website shows the returns to be only up to 20 percent.</p><p>Kraken’s ad on staking</p><p>The SEC raised risk-related concerns on the platforms offering staking-as-a-service as they have “very little protection.”</p><p>“Whether it’s through staking-as-a-service, lending, or other means, crypto intermediaries, when offering investment contracts in exchange for investors’ tokens, need to provide the proper disclosures and safeguards required by our securities laws,” said SEC Chair Gary Gensler.</p><p>“Today’s action should make clear to the marketplace that staking-as-a-service providers must register and provide full, fair, and truthful disclosure and investor protection.”</p><p>Kraken Is Terminating Staking for US Clients</p><p>In a blog post, Kraken confirmed that it is immediately ending its on-chain staking services for US clients and will automatically unstake all US client assets enrolled in the on-chain staking program. However, it will unstake staked Ether after the upcoming Shanghai upgrade but will now distribute rewards.</p><p>The crypto exchange further detailed that it will continue to offer staking services to non-US clients through a separate subsidiary.</p><p>The settlement between the SEC ad Kraken was finalized only a day after media reports revealed an <a href=”https://www.financemagnates.com/cryptocurrency/kraken-faces-sec-probe-over-unregistered-securities-listings/” target=”_blank” rel=”follow”>ongoing regulatory investigation</a> against the exchange for offering unregistered securities.</p><p>Meanwhile, Kraken is also facing the impacts of the ongoing “crypto winter.” The exchange recently <a href=”https://www.financemagnates.com/cryptocurrency/crypto-exchange-kraken-cuts-global-workforce-by-30/” target=”_blank” rel=”follow”>reduced its workforce</a> by 30 percent and <a href=”https://www.financemagnates.com/cryptocurrency/kraken-to-shut-operations-in-japan-by-citing-weak-crypto-market/” target=”_blank” rel=”follow”>shuttered its operations in Japan</a>.</p>
This article was written by Arnab Shome at www.financemagnates.com.
