Just one day after rumors of the staking ban spread, the U.S. Securities and Exchange Commission (SEC) has officially begun cracking down on crypto staking services. The first to be affected was crypto exchange Kraken, which chose to terminate its services and accept a fine after being investigated by the SEC. However, Coinbase continues to "insist" that its staking service will not be affected.
According to the SEC announcement, Kraken was charged with failing to register the offer and sale of their crypto asset staking-as-a-service program, whereby investors transfer crypto assets to Kraken for staking in exchange for advertised annual investment returns of as much as 21 percent. Kraken will discontinue unregistered offer and sale of crypto ssset staking-as-a-service program and pay $30 million to settle SEC charges.
In addition, Kraken said it would automatically unstake any assets staked by U.S. clients except for staked $ETH, which won't be unstaked until after the Ethereum Network's Shanghai upgrade takes effect.
In response, SEC Chair Gary Gensler said, "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. 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."
But U.S. SEC Commissioner Hester Peirce objected, saying that the SEC should issue guidance on crypto staking instead of choosing to speak again through enforcement action, and that the SEC's current solution to a registration violation will shut down a program that has served people well. This SEC action is a "paternalistic and lazy" way of regulation.
Facing SEC charged that Kraken's staking-as-a-service is security, Coinbase Chief Legal Officer Paul Grewal said Coinbase's staking program will not be affected by the termination of Kraken's staking-as-a-service program in U.S., which is offering yield products that are fundamentally different from Coinbase's on-chain staking service.
But that didn't stop Coinbase's stock from falling. The stock tumbled 14%, the biggest drop since July 26th. In addition, $cbETH, a liquidity staking derivative launched by Coinbase, fell 4.53% in the last 24 hours, according to TokenInsight data.
While Kraken has surrendered to SEC's crypto staking ban, Coinbase CEO Brian Armstrong said he will keep fighting for economic freedom. "Being the most trusted brand in crypto means protecting Coinbase customers from government overreach," he added.
Policy and Regulation