Kraken has settled charges with the U.S. Securities and Exchange Commission (SEC) and is shutting down its on-chain staking program, the government agency shared on Thursday.
The exchange, which was charged under its subsidiaries of Payward Ventures and Payward Trading, will pay $30 million in charges for “disgorgement, prejudgment interest and civil penalties.” In response to the settlement, Kraken has agreed to end its on-chain staking services for U.S. clients, a spokesperson for the exchange told TechCrunch.
As part of the settlement, Kraken has neither admitted nor denied the SEC’s allegations, the spokesperson added.
“Whether it’s through staking-as-a-service, lending, or other means, crypto intermediaries, when offering investment contracts in exchange for investors’ tokens, need to provide the proper disclosures and safeguards required by our securities laws,” SEC Chair Gary Gensler said in the release. “Today’s action should make clear to the marketplace that staking-as-a-service providers must register and provide full, fair, and truthful disclosure and investor protection.”
“Starting today, with the exception of staked ether (ETH), assets enrolled in the on-chain staking program by U.S. clients will automatically be unstaked and will no longer earn staking rewards,” a Kraken spokesperson said. “Further, U.S. clients will not be able to stake additional assets, including ETH.”
Kraken was founded in 2011 and offers over 90 tokens to 190 supported countries, according to its website. This update does not affect non-U.S. clients and staking services will continue uninterrupted in other regions. “These clients will receive staking services from a separate Kraken subsidiary,” the spokesperson said.
Staking is a way to earn rewards for holding a certain token for a certain amount of time. In return for staking, people are paid out yield or additional rewards in exchange for holding their coins to secure the network. Kraken’s staking service offered up to 20% APY, with promises to deliver customers their rewards twice a week, according to the website.
The news comes less than a day after Coinbase CEO Brian Armstrong tweeted that he has heard rumors that the SEC would like to get rid of crypto staking for U.S.-based customers.
“I hope that’s not the case as I believe it would be a terrible path for the U.S. if that was allowed to happen,” Armstrong said in the tweet thread. “Staking is a really important innovation in crypto. It allows users to participate directly in running open crypto networks. Staking brings many positive improvements to the space, including scalability, increased security, and reduced carbon footprints.”
While this settlement inhibits Kraken’s staking operations, it doesn’t fully answer the question of whether or not the SEC will block all crypto staking going forward. It’s also worth noting that Coinbase also has its own staking services.
The SEC declined to comment when requested by TechCrunch after the time of publication.
This article may be updated to reflect new information.