Kraken has settled its case against Kraken over the U.S. Securities and Exchange Commission (SEC) and has shut down its staking program on the chain according to a statement from the SEC on Thursday.
The exchange, subject to charges under its subsidiary companies of Payward Ventures and Payward Trading and Payward Trading, will be required to pay $30 million for “disgorgement of prejudgment and prejudgment interests along with civil fines.” In reaction to the agreement, Kraken will stop its staking on-chain in the United States for U.S. clients, a spokesperson for the exchange said to TechCrunch.
In connection with the settlement Kraken has not admitted or denied the allegations made by the SEC the spokesperson stated.
“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,” SEC Chair Gary Gensler said in the release. “Today’s actions should be clear that the market that staking-as a service provider must be registered and provide the full, fair and accurate disclosure, as well as security for investors.”
“Starting today and with the exception of staked Ethereum (ETH) assets that are that are enrolled in the on-chain staking program for U.S. clients will automatically be unstaked and cease to receive staking rewards,” a Kraken spokesperson announced. “Further, U.S. clients won’t be able to stake other assets, which includes ETH.”
Kraken was founded in the year 2011 and offers more than 90 tokens to 190 of its supported countries, as stated on the website. The update is not affecting non-U.S. clients, and the staking service will continue in other countries. “These clients will be receiving the staking services through a separate Kraken affiliate,” the spokesperson said.
Staking allows you to earn rewards by holding a particular token for a specified period of time. As a reward for taking part in staking, participants get paid a yield or other rewards in exchange for holding their coins to protect the network. Kraken’s staking services provided up to 20% of APY and promises to give customers their payouts twice a week, per the website.
The announcement comes just one day from the time Coinbase Chief Executive Officer Brian Armstrong tweeted that he has heard that the SEC wants to eliminate the staking of cryptos to U.S.-based customers.
“I would like to see that this is not the case since I think it could be a disastrous direction in America. U.S. if that was allowed to occur,” Armstrong said in the tweet thread. “Staking is an extremely important technological advancement in the field of crypto. It lets users take part directly in the running of a blockchain-based crypto network that is open. Staking can bring many benefits to the crypto space, such as the ability to scale, enhanced security, and a reduction in carbon footprint.”
Although this settlement restricts Kraken’s stake staking operations, it doesn’t resolve the issue of whether or not the SEC will stop any crypto-based staking in the future. It’s also important to know that Coinbase has its own staking service.
The SEC did not respond to a comment asked by TechCrunch following the publication time.