The Securities and Exchange Commission (SEC) and Kraken have reached a $30 million settlement. The US regulator charged Payward Ventures, Inc. and Payward Trading Ltd., both commonly known as Kraken for offering unregistered crypto asset staking-as-a-service program.
Kraken has agreed to immediately stop offering or selling securities through crypto asset staking services or staking programs.
Staking allows crypto asset holders to get rewards for locking or “staking” their crypto tokens with a blockchain validator. Investors are rewarded with new tokens in return but they lose control over their original cryptos take on risks associated with those platforms, with very little protection.
According to SEC’s complaint, Kraken has offered and sold its crypto asset “staking services” since 2019, advertising annual investment returns of as much as 21%.
SEC Chair Gary Gensler commented:
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. 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 announced in a blogpost it is ending its on-chain staking services for US clients and will automatically unstake all client assets enrolled in the program. The crypto exchange said, however, that its staked ether (ETH) will be unstaked after the Shanghai upgrade
Kraken noted that it will continue to offer staking services to non-US clients through a separate subsidiary.
Earlier in December, Kraken announced it is stopping its operations in Japan, citing current market conditions and weak global crypto market as the reason behind the decision.
