SEC Sanctions Kraken's Ethereum Staking Service and What Comes Next
2 min read · · Korean original
The US SEC's Crackdown on Staking
The US SEC has started cracking down on staking services. Kraken, the third-largest exchange in the US, took a direct hit. Along with shutting down its staking service, it has to pay a USD 30 million fine (KRW 37.7 billion).
A staking service lets you deposit assets and earn rewards on them. SEC Chair Gary Gensler said, "Whether through staking-as-a-service, lending, or other means, crypto intermediaries that take investors' coins must provide the proper disclosures and safeguards required by securities laws."
Is the Staking Crackdown Justified?
Opinions are divided. Some see it as the SEC squeezing crypto, while others argue that proper regulation could actually protect investors. In fact, many DeFi staking services have pulled exit scams, and some, like the FTX exchange, have irresponsibly misused customer funds and then gone bankrupt.
The SEC's grounds for the sanctions are as follows: 1) Kraken staked the tokens itself, generating a stream of cash returns from it; 2) it promised higher returns than individual staking and formed a shared pool; and 3) Kraken actively intervened and made the staking process opaque.
What Happens Next?
The staking crackdown currently applies only to US users, but there are signs it could go global. The thing to watch closely is Ethereum's upcoming Shanghai upgrade. Through the Merge 2.0, Ethereum successfully switched from a Proof of Work (PoW) system to a Proof of Stake (PoS) system. In other words, its network and ecosystem are built around staking. The Shanghai upgrade will let users deposit and withdraw staked ETH and receive interest.
Against this backdrop, the flagship product the SEC targeted when it charged Kraken with "selling unregistered securities" is none other than Ethereum staking. If people can no longer stake conveniently through exchanges, or freely withdraw interest without taxes, the appeal of staking would drop sharply. On top of that, most coins today, except Bitcoin, are based on Proof of Stake. If the amount staked falls, token prices could drop and network security could become more vulnerable.
