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The SEC today hit San Francisco-based cryptocurrency exchange Kraken with a $30 million fine for violating securities laws.
In a Thursday announcement, the regulatory body announced the firm had failed to register the offering and sale of its staking-as-a-service program for cryptoassets.
Kraken – which consists of Payward Ventures, Inc. and Payward Trading Ltd. — agreed to stop its betting service for U.S. customers, but did not admit or deny the allegations in the SEC’s complaint.
SEC Chairman Gary Gensler said, “Today’s action should make clear to the market that staking-as-a-service providers must register and provide full, fair and truthful disclosure and investor protection.”
Kraken did not immediately respond Decryptquestion, but so it will continue to offer betting services for non-US customers through a separate Kraken subsidiary.
Staking is the process of “unlocking” cryptocurrency to keep the blockchain’s network running. Those who hold proof of effort assets – such as Ethereum (ETH), the second largest cryptocurrency – pledge it to the network by sending it to a specific blockchain address and can receive rewards for doing so. For example, holding ETH on Kraken would have generated between 4% and 7% returns on those holdings. On Coinbase, ETH holders can currently earn up to 4.27% APY on their tokens.
Kraken is the fourth largest crypto exchange by daily volume, according to CoinGecko. It allows customers to buy and sell cryptocurrencies such as Bitcoin, Ethereum and Dogecoin.
Its staking service allows users to earn up to 24% annually with some tokens.
The SEC has been getting tough on the crypto world lately – especially exchanges: Just last month hit Genesis and Gemini with fees for offering unregistered securities.
SEC Chairman Gary Gensler wants to crack down on all coins and tokens he believes are unregistered securities.
Regulators have increased the pressure after collapse of the huge digital asset exchange FTX last year.
The company was once one of the largest exchanges in the area, but went bankrupt after it was allegedly criminally mismanaged by—in the words by new CEO John J. Ray III—”a very small group of grossly inexperienced and unsophisticated individuals.”
Its ex-chief executive and co-founder Sam Bankman-Fried is now facing eight charges. He pleaded not guilty last month and will appear in court again in October.
Kraken has been facing regulatory issues recently. In November, it agreed to pay US Treasury Department’s Office of Foreign Assets Control $362,158.70 for apparent sanctions violations against Iran.
