According to the latest reports, Kraken has reached a settlement with the U.S. Securities and Exchange Commission (SEC) that requires the company to end its operations related to staking cryptocurrencies. During a meeting of the SEC commissioners that will take place behind closed doors on Thursday afternoon, the topic of the settlement will be discussed and voted on; following an announcement that may take place later that day.
Kraken Sunsets Crypto Staking
Under the staking umbrella, the Kraken crypto exchange provides customers with a variety of services, one of which is a crypto-lending product that promises returns of up to 24%; which will likely come to an end as well as a result of the settlement. According to the website for Kraken’s staking service, the company provided a 20% annual percentage yield (APY) and guaranteed that consumers would receive staking payments twice each week.
The SEC Chair has been reportedly quoted as saying:
Kraken mentioned in its official response that the exchange “will automatically unstake all U.S. client assets enrolled in the on-chain staking program” starting today. However, the firm confirmed that it will continue to offer staking services for non-U.S. Clients through a separate subsidiary. Kraken has also been charged to pay $30 million in disgorgement, prejudgment interest and civil penalties. According to a story that was published earlier on CoinGape, Kraken was already very close to reaching a settlement with the SEC regarding the selling of unregistered securities on Wednesday.
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The decision was made just a day after Coinbase CEO Brian Armstrong remarked that he had received rumors that the SEC might forbid retail customers from using the staking feature, which involves putting up crypto tokens as collateral to power blockchains like Ethereum. However, the SEC chose not to react but take direct action in response to Armstrong’s remarks from Wednesday night. This casts a shadow of doubt on Coinbase’s proprietary staking services along with other exchanges operating in the United States.
SEC’s Growing Crypto Crackdown
SEC Chair Gary Gensler has stated in the past that he believed staking may need to pass the requirements of the Howey Test, even if they are propagated through licensed intermediaries like Coinbase or Kraken. The Howey Test dates back several decades and is commonly used as a measure to determine whether a token is a security or not under the laws of the country.
At the time, Gensler stated that staking appears to be comparable to lending. In the past, the SEC has initiated charges against lending companies and settled those charges with the companies, such as the lender BlockFi, which is now defunct.
Besides the continuing SEC probe, Kraken has also recently ceased operations in Abu Dhabi, despite having been awarded a local license there only a year ago. Earlier, it ceased doing business in Japan, citing falling cryptocurrency demand and the country’s straitening regulatory climate.
