Cryptocurrency exchange Kraken will shut down its altcoin staking service and pay a $30 million fine in the SEC deal. The announcement from the SEC confirmed the news.
Kraken terminates altcoin staking services
The U.S. Securities and Exchange Commission (SEC) announced on Thursday that crypto exchange Kraken will ‘immediately’ discontinue its altcoin-as-a-service staking platform and pay $30 million to the SEC for offering unregistered securities. Payward Ventures, Inc., the registered companies that make up Kraken. and Payward Trading Ltd. will terminate their staking services and programs. The programs have provided the general public with access to staking services since at least 2019. The SEC statement included the following:
The complaint alleges that Kraken’s staking investment program offers benefits that result from Kraken’s efforts on behalf of investors, including an easy-to-use platform and strategies to generate regular investment returns and payouts from Kraken.
Kraken said in a blog post that until the Shanghai upgrade of the Ethereum Network goes into effect, all assets staked by US customers, except staked ETH, will be automatically removed. US customers will also not be able to stake new assets (including ETH). However, non-US customers will not be affected.
The SEC filed the lawsuit in federal court on Thursday.
Kraken’s website offers a 20% return on its staking service, while the SEC press release suggested that this could go up to 21%. In a press release, the SEC’s characterization of Kraken’s staking setup highlighted the ‘risks’ investors bear when staking their tokens with ‘staking-as-a-service’ providers who provide them with ‘little protection’.
Staking involves the process of securing PoS Blockchain networks like Ethereum. The network’s decentralized validators deposit crypto as a form of collateral to prove they will stay honest. In exchange for processing transactions, more tokens are rewarded. Many crypto stakers lend their tokens to service providers who run nodes and share returns.
As with a number of decentralized protocols such as Lido, Coinbase (COIN) offers staking for its customers. cryptocoin.comAs you follow from SEC Chairman Gary Gensler, “Whether through staking-as-a-service, lending or other means, crypto brokers must provide appropriate disclosures and protections required by our securities laws when offering investment contracts in exchange for investors’ tokens. Today’s action should clarify that staking-as-a-service providers must register and provide full, fair and truthful disclosure and investor protection.”
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