While some countries have banned the use of cryptocurrencies, some nations only banned crypto mining. But lately, it seems that the US Securities and Exchange Commission (SEC) is eyeing crypto staking, which could get banned in the country.
Kraken crypto staking program cancelled
Just one week ago, Berkshire Hathaway’s Charlie Munger urged the US to ban crypto. Now the SEC unveiled its attack on crypto staking in the country. However, Hester Peirce, a commissioner of the SEC, is critical of the agency’s recent attack on Kraken, a cryptocurrency exchange that was ordered to end its staking program and pay a $30 million fine.
Peirce argues that the typical American investor is hurt by the SEC’s efforts to regulate the business through enforcement in an official letter. While the agency celebrates this move and sees it as “a win for investors,” the whole crypto community is furious.
An aggressive new stance by the markets regulator over a vital revenue source for exchanges has been signalled by the SEC’s decision to file charges against Kraken. It accuses the crypto exchange for failing to register the offer and sale of its “crypto asset staking-as-a-service program.”
On Thursday afternoon, Kraken reached a settlement with SEC, resulting in the halting of the staking program and agreeing to pay disgorgement, prejudgment interest, and civil penalties totalling $30 million.
Gary Gensler, the chairman of SEC, explained that staking programs are not showing enough information about the service, including risks mainly. This way, SEC wants to protect investors from suffering heavy losses, when they are forced to seek pennies on the dollar in court in case of bankruptcy of the staking provider.
Brian Armstrong’s tweet, source: twitter.com
A day before the settlement, Coinbase CEO, Brian Armstrong, tweeted that he had heard rumors that the SEC would like to get rid of crypto staking in the US for retail users. Of course, it would also be bad for Coinbase as it has its staking program as well.
Coinbase CLO, Paul Grewal, stated on Thursday that the company’s staking program would continue to be unaffected by the news, at least for now. Grewal claimed that Coinbase’s staking services were “fundamentally different” and not securities, whereas Kraken was selling a yield product.
“Staking is an important part of the crypto ecosystem, allowing individuals to participate in decentralized networks and giving investors more options to earn passive income,” said Kristin Smith, the CEO of Blockchain Association.
Even the former co-founder of Kraken, Jesse Powell, told his opinion on the situation. He said congress should act now to protect the domestic crypto industry, because investors may be going offshore to get services not available in the US.
Jesse Powell tweet, source: twitter.com
The effect on markets
When the news was revealed, the whole cryptocurrency market dropped, with a total crypto market cap erasing of over $40 billion. Bitcoin is down 3.7%, Ethereum fell 5.2%, and Cardano plunged 6.2%.
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But it’s not just the crypto market that bled. Stock indices along with Coinbase (COIN) stock tumbled. COIN fell 14.13% in just one day. If crypto staking is banned in the whole country, it could hurt Coinbase and other companies that have this service in their offering.
Coinbase (COIN) stock chart, source: google.com
While staking revenue may still be small for crypto companies, there is an enormous potential for both the investor and service facilitator with the growth of the whole crypto industry.