Cryptocurrency trading platform Kraken has been ordered to halt its crypto staking-as-a-service platform “immediately” for US users, the United States Securities and Exchange Commission (SEC) has revealed.
The move comes after the platform paid $30 million to the SEC after the latter charged Kraken with providing unregistered securities.
Both of Kraken’s registered companies, Payward Ventures Inc and Payward Trading Ltd, would halt the programmes offered to public users since 2019, according to the SEC in a statement.
The regulator continued: “The complaint alleges that Kraken touts that its staking investment program offers an easy-to-use platform and benefits that derive from Kraken’s efforts on behalf of investors, including Kraken’s strategies to obtain regular investment returns and payouts.”
Kraken Response
The cryptocurrency platform responded in a blog post it would unstake assets staked by US customers save for those conducted in Ether. The company will not take measures on Ethereum-based stakes until after the network conducts its Shanghai upgrade.
It explained that staking services for non-US clients would “continue uninterrupted.”
The SEC added that Kraken’s staking mechanism revealed “risks” for investors using the tool, offering them “very little protection.”
Staking involves proof-of-stake blockchain networks that use decentralised validators. These provide cryptocurrencies as collateral as proof it will use the networks honestly, in return for token rewards.
SEC chair Gary Gensler explained: “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.”
He concluded that the organisation’s actions would “make clear” to cryptocurrency markets that staking-as-a-service providers will “register and provide full, fair and truthful disclosure and investor protection.”
