Crypto Exchange “Kraken” Settles With SEC for $30 Million

Securities and Exchange Commission (SEC() settled a case against the cryptocurrency exchange KrakenIt took down one of its U.S.-based operations.

Kraken agreed to shut down its cryptocurrency staking service and paid a $30 million fine to settle charges that it failed to register the offer or sale of the program, The SEC made the announcement on February 9.

This is the first time that the SEC has successfully ended the popular service offered by crypto-exchanges. They have grown to be very popular across the United States.

Staking services let customers earn a yield on their digital assets by temporarily handing their crypto tokens over to an intermediary, or a major cryptocurrency network like Kraken and Gemini, which would otherwise sit idle on their platforms.

Crypto staking normally allowed investors to store their crypto assets via a blockchain validator, which verifies the accuracy of transactions on the blockchain, from which they can later receive additional crypto tokens as a reward for locking their assets away.

SEC Takes a Big Step to Stop US-Based Crypto Operations

The company’s settlement with the regulatory agency sends a signal to other big crypto platforms that offer similar offerings, as the government begins a crackdown on actions targeting the crypto industry.

This move follows weeks of accusations by the SEC against Genesis, a crypto lender. crypto exchange Gemini for allegedly selling unregistered securities.

“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,” Gary Gensler, SEC Chair, said so 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.”

According to the SEC, Kraken did not register the sale and offer of its crypto-staking-as a service program.

American-based investors allegedly had crypto assets worth over $2.7 billion on the company’s platform, which earned Kraken around $147 million in revenue, according to the SEC complaint.

More than 135,000 users throughout the Untied States had registered for Kraken’s staking platform, the SEC said.

Kraken accused of setting up a crypto investment program without authorisation

The SEC further accused Kraken of incentivizing investors by promising them “enhanced liquidity and immediate rewards” You can use their staking software.

The agency stated that the crypto exchange promoted the platform as an investment opportunity and earned it a net profit of almost $15 million on revenue from U.S.-based customers.

Customers using a href=”https://pro.kraken.com/”>Kraken’s Website were sold returns of up to 20 percent annual percentage yield through its staking product and it also promised to deliver those rewards to customers twice a week basis.

Kraken issued a press release explaining that the agreement with SEC would only affect American-based clients, and that domestic users would automatically enroll in most assets under its program. “unstaked” Immediately, February 9, 2009

Coinbase CEO Brian Armstrong stated this week that said a ban on staking for American crypto investors would be “a terrible path for the U.S.”

“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 spoke.

Kraken did not admit or deny the allegations made in the SEC’s complaint.

After the settlement announcement on February 9, Coinbase’s shares plunged more than 14 percent.

This report was contributed by Reuters