Earlier Coinbase CEO Brian Armstrong took to Twitter and confirmed his fears about the staking ban in the United States.
The U.S. Securities and Exchange Commission slapped $30 million fine on San Francisco based cryptocurrency exchange Kraken for violating securities laws. The firm has failed to register the offer and sale of its crypto asset staking-as-a-service program.
As per the program, investors transfer crypto assets i.e tokens to Kraken exchange to avail its staking services which generate an annual investment return of up to 24%.
In response to the charges filed by SEC, Kraken has agreed to immediately halt its staking program for U.S retail users and pay $30 million fine.
According to SEC complaint filed in 2019 against Kraken stated, when investors provide tokens to staking-as-a-service-providers, they lose control of the tokens and risk losing their investment to external factors.
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 is the fourth largest cryptocurrency exchange by daily volume and the staking ban is alarming news for all other exchanges operating in the United States.
The rumours of a blanket ban on staking as a service was confirmed by Brian Armstrong, CEO of Coinbase exchange on Twitter. He stated that SEC has shifted its focus towards the crypto industry, bringing strict crypto regulations in 2023.
The crackdown on the industry picked up steam after FTX exchange filed for bankruptcy in November after it was found misusing customer funds and transferring them to its hedge fund arm Alameda Research.
It was charged with financial misconduct, money laundering and conspiracy to commit wire & security fraud. Genesis was the latest U.S. based crypto lending protocol that filed for bankruptcy in 2023.
SEC head ‘Gary Gensler’ wants a complete crackdown on all the coins and tokens he believes are unregistered securities. He is likely to bring more strict regulations for the industry which may witness the ceasing of crypto-related services offered by the exchanges to the U.S customers.
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Paras is a blockchain writer & video creator at Katoch Tubes. In his free time, he loves watching space exploration documentaries & Hollywood movies.