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US SEC Targets Cryptocurrency ‘Bet’ With Kraken Crackdown According to Reuters


© Reuters. FILE PHOTO: The Kraken cryptocurrency exchange logo is seen in this illustration taken July 28, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

By Hannah Lang

(Reuters) – Cryptocurrency exchange Kraken has agreed to shut down its crypto staking service and pay a $30 million fine to settle U.S. Securities and Exchange Commission charges that it did not sign up for the program, the agency said on Thursday, in a move that could cause headaches for platforms with similar services.

The settlement marks the SEC’s first crackdown on staking, a ubiquitous service offered in both centralized and decentralized cryptocurrency exchanges, including most major exchanges in United States such as Coinbase (NASDAQ:) and Binance US.

In a video announcement posted to Twitter on Thursday, SEC chairman Gary Gensler said that most staking providers do not provide customers with appropriate disclosures, such as how a company insures protect the user’s bet assets. Those providers should register their staking service with the SEC, Gensler adds.

“When a company or platform offers you these types of returns, whether they call their service ‘lending’, ‘earning’, ‘reward’, ‘APY’ or ‘staking’ — that relationship must be accompanied by the protection of federal securities laws,” Gensler said.

Crypto asset owners using the “proof of stake” blockchain can stake some of their assets to potentially participate in transaction validation. In exchange for their work, validators are often rewarded with newly created crypto assets.

Kraken offers its customers the ability to “stake” certain crypto tokens to earn rewards. Its website advertises that users can earn up to 20% annual return if they commit to locking up their assets for a certain period of time.

The San Francisco-based platform has not admitted or denied the allegations in the SEC complaint.

In a statement, Kraken said its agreement to terminate its on-chain staking service will only affect US customers, and most assets registered by US users in its program will automatically The “no bet” action starts on Thursday.

In a series of tweets on Wednesday, Coinbase CEO Brian Armstrong said a staking ban on US retail customers would be “a bad road for the US” Coinbase also offers the service. bets for US customers.

“We need to make sure that new technologies are encouraged to develop in the US and are not hindered by a lack of clear rules,” Armstrong said.

Shares of Coinbase fell more than 14% on Thursday.

Kraken in November agreed to pay $362,000 to the US Treasury Department’s Office of Foreign Assets Control to settle civil liability related to apparent sanctions violations against Iran and investment. add $100,000 to certain sanctions compliance controls.

The company’s incoming CEO told Reuters in September that the exchange has no plans to register with the SEC as a market intermediary or delist the crypto tokens that the agency claims. management has labeled as securities.

The settlement comes a year after a subsidiary of crypto firm BlockFi Inc agreed to pay $100 million to the SEC and 32 states to settle fees related to a crypto lending product. retail that the company has provided to nearly 600,000 investors.

As part of the deal, BlockFi planned to offer an alternative that was expected to be the first cryptocurrency interest-bearing security registered with the SEC, but the New Jersey company filed filed for bankruptcy in November without launching a product.



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