Bitcoin prices dropped 3.64% to $21,899.5 in the last 24 hours after the U.S. Securities and Exchange Commission (SEC) took action against Kraken and shut down its staking program. [1] Kraken was charged with offering unregistered securities and agreed to pay a $30 million penalty. [2] The SEC argued that the staking program should have been registered, and as part of the settlement, Kraken must end its staking-as-a-service program in the US. [3] This agreement highlights the need for crypto yield programs to be labeled as securities, subject to stricter laws and regulations.
References:
[1] Kraken Down: Statement on SEC v. Payward Ventures, Inc., et … [2] Kraken to Shut US Crypto-Staking Service, Pay $30M Fine in … [3] Kraken pays a $30 million fine and shuts down crypto staking …
SEC shutdown staking in Kraken
In a landmark settlement with the U.S. Securities and Exchange Commission (SEC), crypto exchange Kraken has agreed to shut down its cryptocurrency staking service and pay $30 million in penalties. [1] The SEC charged Payward Ventures, Inc. and Payward Trading Ltd. for failing to register their crypto asset staking-as-a-service program, which allowed investors to transfer crypto assets to Kraken for staking in exchange for advertised annual investment returns of as much as 21 percent. [2] Kraken was offering and selling its staking services to the public since 2019, touting an easy-to-use platform and benefits that derive from Kraken’s efforts on behalf of investors. [3] The penalty is indicative of the SEC’s continued focus on the cryptocurrency industry, and serves as a reminder to market participants of the importance of compliance with federal securities laws.
References:
[1] Crypto exchange Kraken to shut down staking … – Reuters [2] Kraken to Discontinue Unregistered Offer and Sale of Crypto … [3] Crypto exchange Kraken to end staking service, pay fine in …We can read SEC Press Release:
“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.
What Does Staking Mean in Crypto?
Staking is the process of holding and/or locking up cryptocurrency in order to receive rewards. Staking can be done on a variety of different cryptocurrencies and is often done to secure a blockchain network, similar to how miners secure a proof of work network. Staking is different from mining in that the person staking their crypto does not need to use their computing power to verify transactions. Instead, the crypto is simply locked in place and the person is rewarded through transaction fees.
This makes staking a more energy-efficient way of participating in a blockchain network. Staking can also be used to earn rewards, typically in the form of more cryptocurrency. Many platforms now offer staking rewards for holding certain coins for a certain amount of time. This can be a great way to passively earn extra crypto.
Can Crypto Survive to Staking Crackdown ?
The crypto industry was rattled when the Securities and Exchange Commission (SEC) declared that certain digital assets, namely Ethereum, could be classified as securities. This has raised the possibility that staking could be regulated as a form of investment.
In such a scenario, the SEC could require staking platforms to register with the agency and potentially introduce restrictions on the amount of money that could be invested.
Despite the potentially damaging effects of a SEC crackdown on staking, it’s likely that the crypto industry would still be able to survive. This is because staking is only a small part of the overall crypto economy. Even if the SEC were to regulate staking, the crypto industry’s core business model would remain intact.
Furthermore, the crypto industry is an incredibly resilient and adaptive one. In the past, it has faced down the threat of regulation from multiple governments and emerged unscathed. It is likely to be able to do the same in the face of a SEC crackdown on staking.
Finally, while a SEC crackdown would undoubtedly have some negative effects on the crypto market, it would be a mistake to overestimate its impact. The crypto industry is vast and complex, and any attempt to regulate it would be difficult to enforce. Indeed, it is likely that the effects of such a crackdown would be limited in scope.
In conclusion, while a SEC crackdown on staking could have some damaging effects, it is unlikely to completely derail the crypto industry. The industry is resilient and adaptive, and its core business model would remain intact even if staking were to be regulated. Moreover, the scope of such a crackdown is likely to be limited, making it unlikely to cause major damage.
Decentralized staking platforms may gain more market share
Decentralized staking platforms are on the rise in the cryptocurrency world, as they offer higher security, fewer restrictions, and greater control for users. This makes them attractive to a growing number of investors and traders.
As more people become aware of the advantages of decentralized staking platforms, they are likely to switch from centralized platforms. This could lead to increased market share for these platforms.
Decentralized staking platforms have a number of advantages over traditional centralized platforms. They are more secure, since they are not held at a single point, and they are less vulnerable to hacking. They also have lower fees, as they don’t have to pay the costs associated with a third-party custodian.
Moreover, decentralized staking platforms offer users more control over their funds. They can choose which coins to stake, and when to move them, without relying on a centralized entity. This can be very appealing to users who want more control over their investments.
For these reasons, it is likely that decentralized staking platforms will continue to gain more market share in the coming years. As more investors and traders become aware of their advantages, they are likely to switch from centralized platforms. This will lead to an increase in market share for decentralized staking platforms.
