[2023-02-09] - Crypto exchange Kraken ends staking programme and pays $30mn in..

[pawel7777]

Crypto exchange Kraken ends staking programme and pays $30mn in SEC case

https://www.ft.com/content/77312c18-899f-4460-a858-fe5439373cb5

Crypto exchange Kraken will discontinue its crypto staking programme and pay $30mn in a settlement with the US Securities and Exchange Commission, as the regulator expands its crackdown on digital assets.

The settlement resolves claims from the SEC that Kraken — one of the best-known exchanges in the crypto industry — failed to register the offer and sale of their crypto asset programme. Investors would transfer crypto to Kraken, “staking” their tokens, in exchange for returns of up to as much as 21 per cent, the regulator said.

Kraken sold digital asset “staking services” to the public starting in 2019 and has marketed its staking investment scheme as “an easy-to-use platform”, the SEC said. By April last year, US investors had poured more than $2.7bn worth of crypto assets into the company’s staking scheme, which has earned Kraken approximately $147mn in net revenue since its launch, according to the agency.
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[bbc.reporter]

@pawel7777. I was mentioning this in another thread. Yes, Gary Gensler has begun his crackdown on illegal securities in the cryptospace and it appears that he will use forceful action without giving warnings. This will not be similar to what the SEC has done before where they issued warnings before enforcement. This time it might be enforcement first before discussions. I speculate that exchanges' staking programs will be stopped in America and market capitalization of tokens issued by Defi projects of American developers will be dumped. This will be the crypto storyline of 2023.

[bmwister]

Did you know that Ethereum (ETH) will temporarily be an exception to this rule? Ethereum stacking on the platform will be discontinued after the update of the altcoin network called Shanghai, which is expected in March. The delay in the cancellation of stacking with ETH coins is due to the fact that the altcoin cannot technically be withdrawn from the program before the upcoming update.

Kraken accounts for 7.4% of all Ethereum coins in stacking (1.23 million ETH - $1.9 billion), according to analytics platform Dune.

Generally speaking, the discontinuation of the service for U.S. customers is said to stem from an SEC investigation into Payward Ventures and Payward Trading (operators of the Kraken exchange). The regulator accused them of not properly registering their stacking program as a service, under which investors hand over crypto assets to Kraken for placement in order to earn returns of up to 21% per annum.

And on that to settle the SEC charges, the companies agreed to immediately stop stacking for U.S. users and pay a $30 million fine.

Perhaps that's the way it should be...

[stompix]

This is starting to get ugly for Kraken, one small step at a time
- 30 million fine which is easy to pay but a huge chunk of revenue and customers gone
- IRS  again filing for a court approval to check the user's finances and tax liabilities
- exiting Japan and now Abu Dhabi

The surprise came from Coinbase, as they obviously are going to be next and they are already on the offensive, but there was one tweet from Armstrong and one tiny phrase that caught my eye:
https://twitter.com/brian_armstrong/status/1623459203150131201

Staking is a really important innovation in crypto. It allows users to participate directly in running open crypto networks. Staking brings many positive improvements to the space, including scalability, increased security, and reduced carbon footprints.

And it immediately backfired 

[LeGaulois]

Could be a step of this process?

1) Coinbase CEO Says SEC Could Possibly Ban Crypto Staking

2) And more important, Operation Choke Point 2.0

Operation Choke Point 2.0 shadows crypto market as Biden Administration secretly plans a widespread crackdown against crypto.
there’s a highly coordinated plan, involving almost all U.S. regulators, in discussion to strangle the crypto industry by cutting its ties with the banking sector

Remember, they can't attack the crypto market directly, so there is no better solution to do it via companies and the banking industry.
Companies... You know, the things some pseudo-bitcoinners are praising here and there like a god, because "it's good for the bitcoin's adoption...
Now years later, they complain... lol

[pawel7777]

@pawel7777. I was mentioning this in another thread. Yes, Gary Gensler has begun his crackdown on illegal securities in the cryptospace and it appears that he will use forceful action without giving warnings. This will not be similar to what the SEC has done before where they issued warnings before enforcement. This time it might be enforcement first before discussions. I speculate that exchanges' staking programs will be stopped in America and market capitalization of tokens issued by Defi projects of American developers will be dumped. This will be the crypto storyline of 2023.

Yeah, looks like that's what they're doing. Gensler released a short, 3min video on twitter yesterday:

https://twitter.com/GaryGensler/status/1623777842000539648


Seems like they're focused on centralised exchanges (or similar platforms) offering staking as a service, and not necessarily after any tokens that use proof of stake, at least not yet.
And to be fair, they hinted many times in the past that some crypto activities fall under securities rules, so it's not like there was no warning at all.

[bbc.reporter]

@pawel7777. I am quite certain that centralized exchanges are only the beginning. The crackdown on Defi protocols that have lending pools, give staking rewards or anything that offers yield for your tokens locked might be uncle Gary's real target.

This is starting to get ugly for Kraken, one small step at a time
- 30 million fine which is easy to pay but a huge chunk of revenue and customers gone
- IRS  again filing for a court approval to check the user's finances and tax liabilities
- exiting Japan and now Abu Dhabi

The surprise came from Coinbase, as they obviously are going to be next and they are already on the offensive, but there was one tweet from Armstrong and one tiny phrase that caught my eye:
https://twitter.com/brian_armstrong/status/1623459203150131201

Staking is a really important innovation in crypto. It allows users to participate directly in running open crypto networks. Staking brings many positive improvements to the space, including scalability, increased security, and reduced carbon footprints.

And it immediately backfired  

Brian Armstrong might be naive to think that reduced carbon footprints were a real concern for the American government. It is only about politics. I speculate that people in government who really care about the environment might only be less than 10% of them.