Kraken Agrees To Halt Cryptocurrency Staking Operations In SEC Settlement

Zinger Key Points
  • Details of the settlement were approved during closed-door SEC meeting.
  • Kraken's crypto lending product and staking service will be shut down.

Leading cryptocurrency exchange Kraken has agreed to discontinue its staking operations as part of a settlement with the U.S. Securities and Exchange Commission (SEC), Coindesk reported on Thursday, citing a source familiar with the matter.

The settlement was reportedly approved during a private meeting of the SEC's Commissioners on Thursday, with a public announcement to follow.

The decision to discontinue staking services for U.S. customers was later confirmed by the SEC.

Kraken offered a range of staking services, including a crypto-lending product that promised yields of up to 24%.

According to the source, these services are also expected to be shut down as part of the settlement.

On its website, Kraken's staking service advertised a 20% annual percentage yield, with staking rewards to be paid to customers twice a week.

Benzinga on Wednesday reported Kraken was close to reaching a settlement with the SEC regarding the offering of unregistered securities.

Also Read: 3AC Founders Announces Launch Of New Cryptocurrency Exchange

This news came a day after Coinbase CEO Brian Armstrong tweeted about rumors that the SEC was planning to prevent retail customers from participating in staking, a process where individuals hold crypto tokens to support the functioning of blockchains such as Ethereum ETH/USD.

SEC Chair Gary Gensler has previously stated his belief that staking through intermediaries, such as Kraken, may fall under the definition of securities according to the Howey Test, a decades-old Supreme Court case used to determine if something is a security under U.S. law.

Gensler compared staking to lending and noted the SEC has previously brought charges against and settled with lending companies, including the now-bankrupt BlockFi.

According to Dune Analytics, the majority of individuals staking on Ethereum use intermediaries such as Kraken.

Following the news of the settlement, the cryptocurrency market experienced a dip, with Ethereum falling by 4.5% within 30 minutes.

Read Next: China Supports Blockchain Development, Continues Crackdown On Cryptocurrencies

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Posted In: CryptocurrencyNewsSECMarketsBrian Armstrongcrypto exchangecryptocurrency stakingGary GenslerHowey TestKraken
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