SEC’s Gensler vs SEC’s Peirce: Who is right about Kraken and staking?

Rick Steves

“More transparency around crypto-staking programs like Kraken’s might well be a good thing. However, whether we need a uniform regulatory solution and if that regulatory solution is best provided by a regulator that is hostile to crypto, in the form of an enforcement action, is less clear.”

SEC Commissioner Hester Peirce has commented on the recent SEC action against Kraken, the digital asset trading platform that was forced to end its crypto staking service as part of its settlement.

Many within the digital asset ecosystem have resisted and criticized the SEC enforcement approach to the emerging asset class, but the infamous ‘crypto winter’ – which saw several firms going down after extraordinary risk mismanagement and fraud  – has humbled most, which are now more open to SEC Chair Gary Gensler’s policy.

Besides the announcement of the settlement with Kraken, the financial watchdog yesterday released a video with SEC boss Gensler explaining how staking works, its flaws, and why services providers must be compliant with the agency for the benefit of users.

 

 

Although the settlement with Kraken was seen as a win for the SEC, Commissioner Hester Peirce doesn’t see it that way and made an official statement in that regard:

“Kraken operated a service through which its customers could offer their tokens up for staking. The customers earned returns, and the company earned a fee. The Commission argues that this staking program should have been registered with the SEC as a securities offering. Whether one agrees with that analysis or not, the more fundamental question is whether SEC registration would have been possible. In the current climate, crypto-related offerings are not making it through the SEC’s registration pipeline. An offering like the staking service at issue here raises a host of complicated questions, including whether the staking program as a whole would be registered or whether each token’s staking program would be separately registered, what the important disclosures what be, and what the accounting implications would be for Kraken.

“We have known about crypto staking programs for a long time. Although it may not have made a difference, I should have called for us to put out guidance on staking long before now. Instead of taking the path of thinking through staking programs and issuing guidance, we again chose to speak through an enforcement action, purporting to “make clear to the marketplace that staking-as-a-service providers must register and provide full, fair, and truthful disclosure and investor protection.” Using enforcement actions to tell people what the law is in an emerging industry is not an efficient or fair way of regulating. Moreover, staking services are not uniform, so one-off enforcement actions and cookie-cutter analysis does not cut it.

“Most concerning, though, is that our solution to a registration violation is to shut down entirely a program that has served people well. The program will no longer be available in the United States, and Kraken is enjoined from ever offering a staking service in the United States, registered or not. A paternalistic and lazy regulator settles on a solution like the one in this settlement: do not initiate a public process to develop a workable registration process that provides valuable information to investors, just shut it down.

“More transparency around crypto-staking programs like Kraken’s might well be a good thing. However, whether we need a uniform regulatory solution and if that regulatory solution is best provided by a regulator that is hostile to crypto, in the form of an enforcement action, is less clear.”

The debate over the regulatory approach to digital assets is not new and is likely to continue for many years to come.

Read this next

Industry News

21 Republican representatives want to “End the Fed”

“Americans are suffering under crippling inflation, and the Federal Reserve is to blame.”

Retail FX

Scope Markets launches unleveraged trading

“Whilst our traditional contract for difference (CFD) products continue to prove incredibly popular, the Invest account is unleveraged and only allows ‘long’ positions to be taken, a combination that significantly reduces the risk of capital losses.”

blockdag

Unlocking Profit Potential: Earn Returns with DecodeEX Experience Bonus!

DecodeEX, the innovative brokerage subsidiary of Decode Global, announced its experience bonus campaign, offering every user the opportunity to maximize their strategic trading potential with up to $10,000 in experience bonus. 

Market News

Pretiorates’ Thoughts 28 – Precious metals and base metals out of control

Ten days ago we mentioned in Pretiorates’ Thoughts 26: Chapter 2 should start with Precious Metals.

Retail FX

Webull launches discount brokerage in Malaysia

“Making investing more inclusive and accessible to all, Webull Malaysia brings best-in-class tools and information to empower investors of all levels with knowledge and skills to help them make better investment decisions and achieve their investment goals.”

Digital Assets

Hidden Road adds OKX’s Nitro Spreads into prime brokerage

“Hidden Road continually seeks to increase market access and capital efficiency through expanded prime brokerage offerings. Integrating OKX’s Nitro Spreads product builds upon this philosophy by extending our counterparties’ ability to execute risk-managed arbitrage strategies.”

blockdag

Dev Release 31: BlockDAG’s SHA-3 Upgrades Propel Crypto Mining Innovation as Miner Sales Approach 5800 Units

Learn about BlockDAG’s 31st Development Release, which includes advanced SHA-3 updates and a significant increase in miner sales, driving advancements.

blockdag

BlockDAG Dominates 2024 Crypto Trends: Surpasses $28M in Presales Amid Strategic Partnerships

Explore BlockDAG, Shiba Inu, and Kaspa Killer’s rise in 2024’s crypto market, focusing on BlockDAG’s $28M presales, strategic partnerships, and innovative technology.

blockdag

BlockDAG’s $30 by 2030 Valuation Prediction and Roadmap Reveal Gains Traction From Filecoin and XLM Investors

Discover why BDAG’s $30 price prediction by 2030 outshines Filecoin Investors’ hopes and XLM’s recent surge with a booming presale and clear roadmap.

<