San Francisco-based cryptocurrency exchange, Kraken, has reached a settlement with the US Securities and Exchange Commission (SEC). As part of the settlement, Kraken will pay $30 million in penalties and shut down its staking business for US clients.
Staking Program Ruled “Unlawful” by SEC
Kraken’s staking program offered individual investors the opportunity to lock up their crypto-assets in a pool staked by the exchange in exchange for rewards. The SEC ruled that this program was an “unlawful offer and sale of securities.” Since it was an unregistered offering, investors were lacking important information about the staking program, including investment risks, fees, and the company’s financial condition.
Read More: Kraken Under SEC Investigation for Securities Law Violations
Starting from February 10, all staked assets by US clients will be automatically unstaked, and they will no longer receive staking rewards. Any rewards on previously staked assets will be prorated until February 9. Non-US clients, however, will be able to continue staking their crypto assets through a separate Kraken subsidiary.
SEC Commissioner Hester Pierce publicly disagreed with the regulator’s action. In a statement, she said that the solution to a registration violation should not be to shut down an entire program, but rather to initiate a public process to develop a workable registration process that provides valuable information to investors.
