Bitcoin Price Plunges As Regulations Tighten; Major Exchange pays SEC $30 million
The Securities and Exchange Commission cracked down on cryptocurrency services that offer users returns with its latest regulatory move Thursday night. The SEC is asking crypto exchanges to end their staking-as-a-service programs. The agency charged Kraken, the third largest exchange by volume, with selling unregistered securities. Bitcoin price fell to three-week low as cryptocurrencies fell on the news.
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US-based Kraken paid a $30 million fine to settle the charges. It also announced an end to its return-generating betting services. Kraken launched its stake programs in 2019. It announced annual investment returns of as much as 21%, according to the SEC.
In staking services, users unlock their funds in exchange for rewards when their “staked” tokens are used to validate blockchain data.
In the announcement, SEC Chairman Gary Gensler said crypto intermediaries must provide proper disclosures and safeguards when offering investment contracts, whether through staking-as-a-service, lending or other means. “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,” Gensler said.
Gensler appeared on CNBC’s “Squawk Box” Friday morning. He said other exchanges should “take note” and come into compliance.
Effects on crypto exchange
Following the enforcement action, Coin base (COIN), the top U.S. exchange, said the betting program was not affected by the news. “What is clear from today’s announcement is that Kraken essentially offered a yield product,” Coinbase Chief Legal Officer Paul Grewal wrote in a statement shared with The Block.
Coinbase’s staking services are different because returns are based on rewards paid by protocols and commissions the company discloses, rather than set returns. “Rules clarifying these differences would provide real clarity to consumers, investors and the industry,” Grewal wrote. Many industry experts have called for greater regulatory clarity over the area, saying uncertainty is causing the US to fall behind.
CEO Brian Armstrong also responded on Twitter by tweeting, “we will continue to fight for financial freedom (our mission at Coinbase).”
Bitcoin, Crypto’s Fall
Cryptocurrency markets fell early Friday following Thursday’s announcement. Bitcoin price fell to a three-week low, plunging to $21,650 overnight from Thursday’s high above $22,700. Ethereum fell 5.8% to $1,526 early Friday after trading above $1,630 on Thursday. COIN stock fell 4% on the news and Coinbase stock is down 23% so far this week.
You can follow Harrison Miller for more stock news and updates on Twitter @IBD_Harrison
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