Kraken settles with SEC, shuts down staking services

Kraken has settled with the US Securities and Exchange Commission (SEC) and will be closing its on-chain staking program. The exchange and its subsidiaries, Payward Ventures and Payward Trading, will pay a $30 million settlement for ‘disgorgement, prejudgment interest, and civil penalties.’

The SEC settlement requires Kraken to end its on-chain staking services for US clients. Kraken neither admitted nor denied the SEC’s allegations as part of the agreement.

Staking refers to earning rewards for holding a specific token for a certain period of time. In return for staking, individuals receive yield or extra rewards for securing the network by holding their coins. Kraken’s staking programme promised up to 20% annual percentage yield and weekly payouts, according to the exchange’s website. 

SEC Chair Gary Gensler stated that crypto intermediaries must provide the proper disclosures and safeguards required by securities laws, including staking-as-a-service providers. 

As a result, starting immediately, US clients’ assets in the on-chain staking program will be unstaked and will no longer earn rewards, and US clients will not be able to stake additional assets, excluding ETH.

The recent settlement with the US Securities and Exchange Commission (SEC) has no impact on non-US clients and staking services will continue unaffected in other regions. 

The settlement with the SEC was announced shortly after the CEO of Coinbase, Brian Armstrong, tweeted that he had heard rumours of the SEC wanting to eliminate staking for US customers. This settlement restricts Kraken’s staking services, but it remains unclear if the SEC will ban all crypto staking in the future.