Kraken Exchange Shutdown As Infighting Rocks SEC Over Decision

Following the indiscriminate shutdown of the Kraken exchange crypto staking program by the US Securities and Exchange Commission (SEC), one of the commissioners Hester Pierce has publicly criticized the agency over the decision 

My thoughts on today's Kraken settlement: https://t.co/mijt3MNN4U

— Hester Peirce (@HesterPeirce) February 9, 2023

Pierce in a statement entitled “Kraken Down” on Feb. 9 lambasted her agency for taking such ruthless a decision, stressing that regulation by enforcement is not an efficient or fair way of regulating an emerging industry. 

Her statement partly reads:

“Today, the SEC shut down Kraken’s staking program and counted it as a win for investors. I disagree and therefore dissent.” 

However, she stated that SEC’s latest decision has demonstrated the agency as a lazy and paternalistic one, suggesting that SEC should have embraced a public process to develop a workable registration process that equips investors with valuable info. 

Coinbase CEO Brian Armstrong also aired his view on the latest development on Feb. 9, stating that mandating businesses to register its staking services is a disingenuous offer because there is no lucid path to registration.  

Well said. There was no way to register (a disingenuous offer).

“Using enforcement actions to tell people what the law is in an emerging industry is not an efficient or fair way of regulating.” https://t.co/6wVZZbQt23

— Brian Armstrong (@brian_armstrong) February 9, 2023

Given the foregoing, Kraken reached a $30 million settlement deal with SEC on Feb. 9 to address the charges of failing to register the offer and sale of their crypto-asset staking-as-a-service program. 

Meanwhile, Kraken crypto exchange disclosed via a blog post on Feb 9 that it would continue to offer staking services to non-U.S. customers through a subsidiary and in accordance with the SEC laws.

Coinbase Exchange Likely to be Affected

Against the backdrop of the claim raised by Coinbase CEO Brian Armstrong on Feb 8 that SEC is likely to impose a ban on crypto staking, there is no mincing word that Coinbase is likely to be the next victim of circumstance. 

Already, Coinbase is currently under SEC probe following an Aug. 9 SEC filing as regards the exchange’s staking services.

While no settlement has been made between SEC and Coinbase, it is believed that the allegation is quite similar to the Kraken case and may propel Coinbase to also part ways with millions of dollars. Time will tell.