‘Midnight Massacre:’ SEC Crackdown on Crypto Staking Services Prompts Speculation of Further Enforcement Actions
On February 9, 2023, the cryptocurrency community became aware of the US Securities and Exchange Commission (SEC) crackdown on staking services. The SEC has fined cryptocurrency exchange Kraken $30 million for offering an “unregistered offer” related to its US staking service. Proponents of digital currency are now debating what constitutes a revenue product, rather than a non-custodial solution that is not considered a security. Fox News journalist Eleanor Terrett predicts more regulatory action for the crypto space in the coming weeks, including enforcement action against exchanges and banks.
Observers Assess Future of Crypto Staking After SEC Crackdown
There is a lot of discussion about the recent actions taken by the leading US securities regulator regarding the Kraken crypto exchange and its staking service. The day before, Brian Armstrong, CEO of Coinbase, warned that he had heard rumors that the SEC would try to cancel cryptocurrency staking for retail customers in the United States. The next day, Kraken announced that it was ending staking services for US customers. Securities and Exchange Commission chaired by Gary Gensler disclosed that the regulator settled with Kraken for $30 million for civil penalties and a seizure of money.
On Thursday, Gary Gensler emphasized that cryptocurrency exchanges must comply with regulatory policies when offering investment vehicles to retail clients in the United States. During interview On CNBC’s Squawk Box Friday, Gensler reiterated the position. “Companies like Kraken can offer investment contracts and investment schemes, but they must provide complete, honest and correct information,” Gensler said. “It protects the investors who watch your program. This is the basic law and they didn’t follow it.”
Enforcement has sparked discussions about what constitutes a revenue product versus a non-custodial solution that is not considered a security. Economist and trader Alex Kruger expressed his opinion. “Positive Narrative for Later” by Kruger tweeted. “Banning US exchanges/custodians from offering staking services will push staking off-chain or off-chain, making Ethereum decentralized and out of reach of US regulators. Decentralized Ethereum is better than Ethereum.”
Fox News Reporter Reports Imminent Regulatory Enforcement Against Crypto Exchanges, Banks and Token Issuers Coming Soon
SEC Commissioner Hester Pierce expressed special opinion and do not agree with the actions. Pierce said his “most worrying thing” is that the SEC’s “solution to the filing problem is to completely shut down a program that has served people well.” The commissioner stressed that “a paternalistic and lazy regulator is choosing a solution similar to what was in this agreement: instead of initiating a public process to develop a workable registration process that provides investors with valuable information, it simply closes it.”
Coinbase’s staking service is different, according to Coinbase’s chief legal officer Paul Grewal. “The Coinbase staking program is independent of [Thursday’s] news”, Greval explained in a statement. “What is clear from [Thursday’s] The announcement is that Kraken was essentially offering a profitable product. Coinbase staking services are fundamentally different and are not securities.” In addition to the latest crackdown on staking, there are rumors that more regulation is on the horizon.
On Thursday, Fox News reporter Eleanor Terrett reported that more regulatory action is expected to impact the cryptocurrency industry in the coming weeks. Terrett tweeted, “SCOOP: Gary Gensler embarks on ‘midnight massacre’ to take control of all cryptocurrencies. In the coming weeks, the SEC, the New York City Department of Financial Services, and the Office of the Comptroller of the Currency will take enforcement action against exchanges, banks, and organizations that mint tokens in an attempt to mark most of them as securities. I was told that Gensler’s strategy is to initiate as many enforcement actions as possible while the 118th Congress is still being decided.”
What do you think the future holds for cryptocurrencies in the face of increased regulatory action? Share your thoughts and opinions in the comments below.
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