Members of the cryptocurrency community appear outraged by recent charges brought against crypto exchange Kraken in connection with its staking-as-a-service program. in United States.
On February 9, The US Securities and Exchange Commission (SEC) announced that it had settled with Kraken for “failing to register the offer and sale of its staking program as a crypto asset service,” which it claims are rated securities under your jurisdiction.
Kraken agreed to settle the charges by paying $30 million in penalties and immediately ceasing the offer of staking services to US retail investors, although they will continue to be offered abroad.
The move appears to have drawn criticism not only from the broader cryptocurrency community, but also from investors, politicians, and industry executives.
Cinneamhain Ventures partner and Ethereum bull, Adam Cochran slammed SEC chief Gary Gensler, describing him as “an agent of an anti-crypto agenda” rather than a regulator, and questioning why the same standards were not applied to Sam Bankman-Fried and FTX:
Gensler is not a regulator. He is an agent of an anti-crypto agenda, who only aims to wield his power as a cudgel for those he does not agree with.
So the big question then, is why didn’t FTX get this treatment?
Whose pocket is he in?
—Adam Cochran (adamscochran.eth) (@adamscochran) February 9, 2023
2/2. Gensler is not a regulator. He is an agent of an anti-cryptocurrency agenda, only seeking to wield his power as a bludgeon to those he disagrees with. So the big question is, why didn’t FTX get this treatment? What pocket is it in?
In a February 9 statement shared on Twitter, Kristin Smith, CEO of the Blockchain Association, argued that the situation at hand is a clear example of why Congress – not the SEC – should be working with industry players to forge proper legislation:
The following statement is attributed to @KMSmithDC in response to today’s settlement between the SEC and Kraken: https://t.co/32KysvKfz0 pic.twitter.com/8vkWZXB6a2
— Blockchain Association (@BlockchainAssn) February 9, 2023
The following statement is attributed to @KMSmithDC in response to today’s settlement between the SEC and Kraken:
US congressman Tom Emmer – who has long been a critic of Gary Gensler – reiterated the importance of staking in the cryptocurrency ecosystem.
In a publication from Twitter on February 9, The legislator explained that staking services will play a significant role in “building the next generation of the Internet” and argued that the “purgatory strategy” will harm “most of all ordinary Americans” as they may soon be forced to to seek these services abroad.
For his part, Ryan Sean Adams, founder of the Ethereum program Bankless, suggested to his 220,800 Twitter followers on Feb. 9 that the SEC could have taken other steps instead of just charging Kraken:
You could have:
– Mandated proof-of-reserves
– Required staking transparency
– Supported decentralized staking
Instead, we just got another gary g. ban hammer to the head. And we have no confidence you won’t come for decentralized staking next.
You’re driving it all offshore.
— RYAN SΞAN ADAMS – rsa.eth (@RyanSAdams) February 9, 2023
You could have:
– Mandated that there be a mandatory proof of reserves
– Required transparency in staking
– Supported decentralized staking
Instead, we just got another hammer blow to the head from Gary G. Ban. And we do not trust that they will not come later because of decentralized staking. You are leading people to look for alternatives abroad.
Other members of the community they asked how Kraken was going to register with the securities regulator, as there was “no clear path” to approving crypto staking.
Others suggested which could affect the consensus layer of Ethereum, since Kraken is the fourth largest validator of Ethereum, according to the on-chain metrics platform Nansen.
However, not everyone was against the SEC’s decision. The prominent bitcoin bull Michael Saylor – who has long considered ETH and other proof-of-stake cryptocurrencies to be securities – agreed with Gensler’s analysis that retail investors “lose control” of their tokens when they are delegated to third-party staking service providers. :
“Not your keys…” – @GaryGensler. The @SECGov understands the importance of self-custody. https://t.co/oxPkFeJ77k
—Michael Saylor⚡️ (@saylor) February 9, 2023
“If it’s not your keys…” – @GaryGensler. The @SECGov understands the importance of self-custody.
For his part, Jake Chervinsky, an attorney and director of policy for the Blockchain Association, noted that such “agreements are not law” and that Kraken’s decision to settle was likely an economic decision rather than a legal one:
Settlements are not law. They’re a decision that the economics of settling are better than fighting, no more.
The SEC thinks staking-as-a-service is a security. Kraken didn’t admit or deny either way.
It may be a tough question, but the SEC hasn’t answered it either way today.
—Jake Chervinsky (@jchervinsky) February 9, 2023
Agreements are not laws. They are a decision that the economics of compromising is better than fighting, nothing more. The SEC believes that staking as a service is a security. Kraken neither admitted nor denied either. It may be a difficult question, but the SEC has not answered either way today.
The debate occurs when The SEC’s allegation of enforcing staking service providers has led Coinbase CEO Brian Armstrong to claim that “regulation through enforcement” would be a “terrible path” for American innovators, as it they would be forced to take their services abroad.
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