Kraken to Discontinue US Crypto Staking Service and Pay $30M Fine as Part of SEC Settlement

The U.S. regulator’s declaration verifies a CoinDesk exclusive from Thursday morning.

The U.S. Securities and Exchange Commission (SEC) stated Thursday that cryptocurrency exchange Kraken would “immediately” discontinue its crypto staking-as-a-service platform for U.S. users and pay $30 million to resolve allegations that it issued unregistered securities.

The SEC said that Payward Ventures, Inc. and Payward Trading Ltd., the registered businesses that make up Kraken, would discontinue their staking services and program. Since at least 2019, the initiatives have provided the general public with access to staking services.

Kraken said in a blog post that it will immediately unstake all assets staked by U.S. customers with the exception of staked ether, which would not be unstacked until the Ethereum Network’s Shanghai update goes into effect. Additionally, U.S. customers will be unable to stake additional assets (including ether). Non-American customers are unaffected.

While Kraken’s website advertised a 20% return on its staking service, the SEC’s news release said it might reach 21%.

The SEC’s description of Kraken’s staking system emphasized the “risks” investors assume when staking their tokens with “staking-as-a-service” providers, who provide “very little protection,” according to a press release.

Staking is how proof-of-stake blockchain networks, such as Ethereum, maintain their security. The network’s decentralized validators post crypto as collateral to guarantee their integrity. In exchange for executing transactions, they get more tokens. Numerous crypto-stakes lend their tokens to the service providers that operate the nodes and split the profits. Coinbase (COIN) and several decentralized protocols, such as Lido, enable staking to its consumers.

Also Read: MetaMask Integrates Onramp.Money To Facilitate Cryptocurrency Purchases In India