Kraken Shuts Down Staking Services After SEC Battle

• Kraken has shut down its staking services following an SEC battle.
• The SEC claims that Kraken failed to inform customers of the lack of protections being offered and did not inform them of the company’s overall health, fees charged, or how tokens would be handled.
• Brian Armstrong of Coinbase warned that staking would become a target in coming weeks and months.

Kraken Closes Staking Services Following SEC Battle

Kraken, the Northern California-based trading platform, has agreed to shutter its staking services as part of a settlement agreement with the Securities and Exchange Commission (SEC). The exchange will pay up to $30 million in fees to resolve the case.

SEC Alleges Lack of Protections for Customers

The SEC says that Kraken failed to notify customers engaging in staking activities about the alleged lack of protections being offered. Furthermore, the agency alleges that Kraken did not provide investors with insight into their financial standing or whether they had sufficient means to pay returns on investments made through staking services.

Brian Armstrong Warns About Staking Targeting

Before the SEC’s move against Kraken, Coinbase CEO Brian Armstrong took to social media warning everyone that he feared staking would be targeted by regulatory bodies in coming weeks and months. He argued that removing this innovation from crypto could bear negative consequences for U.S.-based businesses and give foreign enemies a chance to gain an upper hand financially and technologically.

What is Staking?

Staking is a process whereby individuals can earn interest on digital currency units by having them locked up for a set period while they are lent out to other parties. If these funds are not paid back by an agreed date, then additional payments may be earned for extending the lockup period further.

SEC Clarifies Stance on Staking

In response to criticism over their stance towards staking activities, the SEC released a statement clarifying their position: “Staking is not a security…When investors provide tokens to staking-as-a-service companies, those tokens are transferred out of their wallets into those companies’ custody.“