The Securities and Exchange Commission settled a case with a cryptocurrency exchange and clamped down on one of its business practices.
The crypto exchange Kraken agreed to shut down its cryptocurrency staking service and pay $30 million in penalties to settle charges that it failed to register the program, the agency said on Thursday.
The move could become a problem for platforms with similar offerings.
Staking lets customers earn a yield by temporarily handing their crypto tokens over to an intermediary or a cryptocurrency network.
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The settlement marks the SEC’s first crackdown on the service offered by crypto exchanges, including most of the major exchanges in the United States.
“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,” said SEC Chair Gary Gensler in a statement. “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.”
Kraken did not admit or deny the allegations in the SEC’s complaint.
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In a statement, Kraken said it is not ending its staking program. US clients will no longer have access and staking services for non-US clients will continue uninterrupted.
In a series of tweets on Wednesday, Coinbase CEO Brian Armstrong said a ban on staking for U.S. retail customers would be “a terrible path for the U.S.” Coinbase also offers a staking service to its U.S. customers.
“We need to make sure that new technologies are encouraged to grow in the U.S., and not stifled by lack of clear rules,” Armstrong said.
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Shares of Coinbase were down more than 14% on Thursday.
Reuters contributed to this report.