The Commissioner of the United States Securities and Exchange Commission (SEC), Hester Peirce has publicly rebuked her own agency for shutting down Kraken’s US cryptocurrency staking program.
The commissioner lashed out at her regulator in a February 9 statement titled “Kraken Down,” noting that regulation by enforcement is “not an efficient or fair way to regulate” in an emerging industry, stating:
Today, the SEC has shut down the Kraken staking program, deeming it a win for investors. I do not agree and therefore I disagree.
Peirce’s statement also criticized the regulator for shutting down a “program that has served people well.”
“Using enforcement to tell people what the law is in an emerging industry is not an efficient or fair way to regulate. Also, staking services are not uniform, so one-off enforcement and consistent analysis is useless “, he claimed.
My thoughts on today’s Kraken settlement: https://t.co/mijt3MNN4U
—Hester Peirce (@HesterPeirce) February 9, 2023
Peirce hinted that the regulator was “lazy and patronizing” and suggested that the SEC should have initiated a “public process to develop a workable registration process that provides valuable information to investors.”
Coinbase CEO and Co-Founder, Brian Armstrong agreed with Peirce’s comments in a February 9 tweet, sSuggesting that requiring companies to register their staking services is an “insincere offer” as there is no clear path to registration.
Well said. There was no way to register (a disingenuous offer).
“Using enforcement actions to tell people what the law is in an emerging industry is not an efficient or fair way of regulating.” https://t.co/6wVZZbQt23
—Brian Armstrong (@brian_armstrong) February 9, 2023
Earlier this week, Armstrong said that he had heard “rumors that the SEC would like to get rid of cryptocurrency staking in the United States for retail clients,” and said that “it would be a terrible path for the United States” as it would further boost cryptocurrency business abroad.
Coinbase is currently the subject of an SEC investigation similar to the one that led to the Kraken settlement, which revealed in an SEC filing on August 9 that also related to its staking services.
On February 9, the SEC announced that it had reached a $30 million settlement with Kraken, saying there was no “registered the offer and sale of its crypto asset staking-as-a-service program”.
Today we charged Kraken with failing to register the offer and sale of their crypto asset staking-as-a-service program, whereby investors transfer crypto assets to Kraken for staking in exchange for advertised annual investment returns of as much as 21 percent.
— US Securities and Exchange Commission (@SECGov) February 9, 2023
Kraken said in a February 9 post that it would continue to offer staking services to non-US clients through an affiliate, but according to the SEC announcement, the firm is permanently prohibited from offering staking services to US residents, even if they tried to register it with the regulator.
Peirce, aka the SEC’s “Crypto Mom”has been a strong advocate of the cryptocurrency sector during his time at the regulator.
Peirce has previously proposed a “safe harbor” for token projects looking to build decentralized networks, in which network developers would be given a three-year grace period in which they would be exempt from SEC legal action, with an updated version of the proposal published on April 13, 2021.
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