Kraken has agreed to shut its cryptocurrency-staking operations to settle charges with the U.S. Securities and Exchange Commission (SEC), according to an industry source briefed on the matter.
The SEC voted on the settlement during a closed-door commissioner meeting on Thursday afternoon, and an announcement may come later in the day, the industry person told CoinDesk.
A Kraken spokesperson declined to comment. An SEC spokesperson declined to comment after the publication of this article.
The SEC confirmed Kraken would shut down its staking services for U.S. customers after the publication of this article.
Kraken offers a number of services under its staking umbrella, including a crypto-lending product offering up to 24% yield. This is also expected to shut down under the settlement, the industry person said.
Kraken’s staking service offered a 20% APY, promising to send customers staking rewards twice per week, according to its website.
Bloomberg reported that Kraken was close to a settlement with the SEC over offering unregistered securities on Wednesday.
The vote comes a day after Coinbase CEO Brian Armstrong tweeted that he’d heard rumors the SEC would bar retail customers from engaging in staking, the technique of pledging crypto tokens to run blockchains such as Ethereum. The SEC declined to comment on Armstrong’s comments on Wednesday night. Coinbase offers its own staking services.
Staking looks similar to lending, Gensler said at the time. The SEC has brought and settled charges with lending companies before, such as now-bankrupt lender BlockFi.
A Kraken settlement would help Gensler’s mission, giving his agency a big win as it continues its efforts to police the broader crypto ecosystem. The majority of people staking on Ethereum, for example, use services, according to Dune Analytics.
Crypto markets fell after the publication of this article, with Ethereum, a coin secured by a proof-of-stake consensus mechanism, falling 4.5% within 30 minutes.
Danny Nelson contributed reporting.
UPDATE (Feb. 9, 2023, 19:55 UTC): Adds SEC's declining to comment, market reaction.
UPDATE (Feb. 9, 20:24 UTC): Adds SEC confirmation.
UPDATE (Feb. 9, 20:49 UTC): Makes more explicit Kraken will shut down staking for U.S. customers.
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