SEC ordered Kraken to stop providing staking services to US clients and pay $30 million in fines.
Kraken, a United States–based cryptocurrency exchange and bank established in 2011, has reached a settlement with the United States Securities and Exchange Commission (SEC).
According to the press release shared on February 9th, US SEC charged Kraken with “failing to register the offer and sale of their crypto-asset staking-as-a-program.” In the press release, SEC noted that customers were offered “as much as 21 percent” annual investment returns for crypto assets staked on Kraken.
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The cryptocurrency exchange agreed to stop offering crypto staking services for US customers and pay $30 million in prejudgement interest, disgorgement, and civil penalties.
When talking about the verdict, US SEC Chair Gary Gensler noted:
Crypto intermediaries, when offering investment contracts in exchange for investors’ tokens, need to provide the proper disclosures and safeguards required by our securities laws. Today’s action should make clear to the marketplace that staking-as-a-service providers must register and provide full, fair, and truthful disclosure and investor protection.
At the end of its press release, SEC remarked that Kraken, without denying or admitting allegations, agreed to final judgment, which “permanently enjoins them and any entity they control from, directly or indirectly, offering or selling securities through crypto asset staking services or staking programs.”
In a separate announcement, Kraken highlighted that the crypto exchange will automatically unstake all assets enrolled by US users in Kraken’s staking program. On top of that, the company stated that this rule applies to all “staked assets except staked Ether (stETH).” Based on Kraken, stETH will be unstaked after the Shanghai upgrade.
Moreover, one of the largest cryptocurrency exchanges added:
Staking services for non-U.S. clients will continue uninterrupted. Non-U.S. clients can continue to stake and unstake assets, as well as automatically earn and stake rewards, as usual.
The news about the SEC's probe into Kraken broke on February 8th. This is not the first time Kraken reached a settlement with US regulators. At the end of November 2022, Kraken settled with the US Treasury Department’s Office of Foreign Assets Control (OFAC) for violating “sanctions against Iran.”