What the Kraken Crackdown Means for Ethereum Staking
Kraken’s settlement with the SEC over its staking-as-a-service product has put other exchanges on notice—but it may be a boon for decentralized alternatives.
There’s a lot at stake in how Kraken’s settlement with the Securities and Exchange Commission plays out for the crypto industry.
On Thursday afternoon, the SEC announced that crypto exchange Kraken agreed to pay a $30 million fine for not registering the offering and sale of its crypto asset staking-as-a-service program. Just a day before, Coinbase CEO Brian Armstrong warned on Twitter that he’d heard “the SEC would like to get rid of crypto staking in the U.S. for retail customers.”
On its face, it sounds like something that should have been bad for all crypto staking services. But that’s not quite how the news landed. The governance tokens for Lido and Rocket Pool, two of the largest pooled staking services, soared as high as 11% in the past day, according to CoinGecko.
It’s a sign that the market thinks centralized exchanges as staking intermediaries, like Kraken and Coinbase, should worry, but not the rest of the industry. In the past day, Coinbase Wrapped Staked ETH (cbETH) selling volume has outpaced buying at a ratio of almost 3:1, according to GeckoTerminal.
Staked assets on proof-of-stake networks, like Ethereum, help keep networks running. They’re how validators, whose hardware stores data and processes new transactions, prove they have skin in the game. Validators receive rewards for participating on networks, but can lose some of their staked assets for inactivity or other offenses.
Becoming a standalone Ethereum validator, which is now the largest proof of stake network, isn’t easy for most retail-level investors. A user would need 32 ETH, worth roughly $48,000 at current prices, to do it. Instead, users with more modest amounts of ETH to stake turn to staking-as-a-service and pooled staking providers.
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