SEC Chair Gary Gensler Blames Kraken for ‘Choosing’ Not to Follow the Law
Gensler warns that the runway for crypto firms to register with the SEC "is getting awfully short."
The crypto industry uproar following the SEC’s crackdown on staking services has been heard far and wide—yet the agency’s chairman isn’t budging an inch.
Speaking with CNBC’s Squawk Box on Friday, SEC Chair Gary Gensler blamed Kraken for failing to register its staking-as-a-service product with the Commission, and for not providing the relevant risk disclosures. He also dismissed the common criticism that there is a lack of clear rules that govern crypto, or that there is no clear path to register such products.
“There’s a clear way to do this, and there are forms on our website,” he said. “I think it’s just a talking point that the industry is using. They know how to do this. They are just choosing not to do it.”
Crypto staking is both how proof-of-stake blockchains secure their networks and validate transactions and how these networks issue new tokens. Kraken’s staking service, also provided by many other large exchanges and companies, allows the company to stake customer assets on their behalf.
This locks up, or pledges, these assets to their associated blockchain networks and generates yield, often between 4% and 7% APY, which is then split between all parties. On Thursday, the SEC forced Kraken to discontinue that service for its U.S. clients—and pay $30 million in penalties.
“Kraken can offer investment contracts and investment schemes, but they have to have full fair and truthful disclosure and this puts the investors who watch your program in a better position,” said Gensler. “They were not complying with that basic law.”
On Wednesday, Coinbase CEO Brian Armstrong warned that a regulatory crackdown on retail staking services in the United States was coming down the pipe. He and other critics of the SEC’s
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