“Midnight Massacre”: SEC crackdown on crypto staking services prompts speculation of more enforcement action – Regulation
On February 9th, 2023, the cryptocurrency community learned of the crackdown on staking services by the U.S. Securities and Exchange Commission (SEC). The SEC fined Kraken, a cryptocurrency exchange, $30 million for making an “unregistered offer” related to its US staking service. Proponents of digital currencies are now debating what a yield product is versus a non-custodial solution that is not considered collateral. Fox News journalist Eleanor Terrett predicts more government crackdowns in the crypto space in the coming weeks, including enforcement actions against exchanges and banks.
Observers comment on the future of crypto staking after the SEC crackdown
There has been much debate about the recent actions by the US Securities and Exchange Commission against crypto exchange Kraken and its operations service. The day before, Coinbase CEO Brian Armstrong warned that he had heard rumors that the SEC was trying to stop staking cryptocurrencies to eliminate for residential customers in the United States. The next day, Kraken announced that it would discontinue staking services for US customers. The SEC, chaired by Gary Gensler, announced that the regulator has settled $30 million in civil penalties and disgorgement with Kraken over the matter.
On Thursday, Gary Gensler emphasized that cryptocurrency exchanges must comply with regulatory guidelines when offering investment vehicles to retail clients in the United States. during one interview with CNBC’s “Squawk Box” on Friday, Gensler reiterated that stance. “Companies like Kraken can offer investment contracts and investment plans, but they must provide full, fair and truthful disclosure,” Gensler said. “It protects the investors who watch your show. That is the basic law and they have not complied with it.”
The enforcement actions have sparked discussions about what constitutes a return product versus a non-custodial solution that is not considered collateral. Economist and trader Alex Krüger agreed. “Positive narrative spin for later”, Krüger tweeted. “The ban on US exchanges/custodians from offering staking services will drive off-chain or offshore staking Ethereum decentralized and out of the reach of US regulators. Decentralized Ethereum is better Ethereum.”
The Fox News reporter said upcoming regulatory enforcement actions against crypto exchanges, banks and token issuers are imminent
SEC Commissioner Hester Peirce expressed a dissenting opinion and contradicted the measures. Peirce said it was “extremely worrying” that the SEC’s “solution to a registry violation is to completely shut down a program that has served people well.” The commissioner stressed that “a paternalistic and lazy regulator agrees on a solution like that in this settlement: instead of launching a public process to develop a workable registration process that will provide investors with valuable information, it simply shuts it down.”
Coinbase’s staking service is different, according to Paul Grewal, Coinbase’s Chief Legal Officer. “Coinbase’s staking program is unaffected [Thursday’s] News,” Grewal explained in a statement. “What is clear from [Thursday’s] Announcement is that Kraken is essentially offering a yield product. Coinbase’s staking services are fundamentally different and not securities.” In addition to the recent crackdown on staking, rumors are circulating that further regulatory enforcement is on the horizon.
On Thursday, Fox News reporter Eleanor Terrett reported that more regulatory action is expected to affect the cryptocurrency industry in the coming weeks. terett tweeted, “SCOOP: Gary Gensler embarks on a ‘midnight massacre’ to take control of all cryptography. In the coming weeks, the SEC, the New York Department of Financial Services, and the Office of the Comptroller of the Currency will take enforcement action against exchanges, banks, and companies that mint tokens to designate most of them as securities. I have been told that Gensler’s strategy is to initiate as much enforcement action as possible while the 118th Congress is still being wound up.”
What do you think the future holds for cryptocurrency as regulatory enforcement increases? Share your thoughts and opinions in the comments below.
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Source: Crypto News Deutsch
