SEC Shuts Down Kraken Staking: BTC & ETH Plunge 4%

• The SEC has laid charges against Kraken for offering unregistered staking services and Kraken has agreed to halt the service and pay $30 million in disgorgement, prejudgment interest, and civil penalties.
• The SEC argues that cryptocurrency intermediaries, when offering investment contracts in exchange for investors’ tokens, need to provide proper disclosures and safeguards as required by securities laws.
• This move from the SEC is meant to protect investors from staking services which offer returns “untethered to any economic realities”.

SEC Termination of Kraken Staking Services

The Securities and Exchange Commission (SEC) recently laid charges against the crypto exchange Kraken for offering unregistered staking services. In response to this action, Kraken has agreed to halt its service and pay $30 million in disgorgement, prejudgment interest, and civil penalties without admitting or denying any wrongdoing.

What Are Staking Services?

Staking-as-a-service involves pooling users‘ cryptocurrency together in order to generate a return on their investments in the form of rewards paid out by the network they are staked on. To avail these services, investors hand over their cryptocurrency with a promise of a return that is not tethered to any economic reality.

SEC Action Against Staking Services

According to SEC Chair Gary Gensler all crypto intermediaries providing investment contracts must register themselves with the SEC and provide adequate disclosures regarding any risks involved when offering such contracts for token investments. He further added that proof of stake cryptocurrencies may also constitute securities in themselves. Gurbir S. Grewal Director of Enforcement at the SEC said this shutdown will help protect investors from such platforms which offer returns untethered from economic realities while retaining the right not to pay any interest at all if they choose so.

Conclusion

This termination of Kraken’s staking service is an effort by the US Security Exchange Commission (SEC) to protect investors from unregulated financial products offered by crypto exchanges like Kraken which do not adhere strictly to existing securities laws guidelines regarding disclosure and safety measures related with investment contracts involving tokens..

Takeaway

Crypto intermediaries should ensure compliance with local regulations before offering token investments as security sales require registration with appropriate authorities along with necessary disclosures about potential risks involved while investing through such products.