The cryptocurrency market fell in the last week as the Securities and Exchange Commission charged crypto exchange Kraken for offering its "staking as a service" program as an unregistered security, prompting concerns of multipronged regulatory action, Bernstein said in a research report Monday.

The allegations against Kraken are related to the exchange’s specific program, the report said. The main question is whether staking itself is a security, or was it specific to the way in which Kraken offered and marketed the program, the report added.

“The question remains whether the regulator would go after all staking programs, even if they provide specific disclosures around yield, allow users to actively stake and un-stake their crypto and operate on a pass-through basis, both on returns and costs,” analysts Gautam Chhugani and Manas Agrawal wrote.

Bernstein says a decision by the regulator to prohibit all staking programs may not be straightforward, and some firms could decide to fight against the regulatory stance. The broker notes that the crypto industry still argues that the “absence of crypto-specific guidance or regulation will continue hurting even the good players, who choose to offer transparent staking services, which by itself would not classify as a security, under the Howey Test.”

The Howey Test relates to the U.S Supreme Court case for determining whether a transaction qualifies as an investment contract. If a transaction is considered to be an investment contract, it's classified as a security.

There have been mounting concerns that more severe regulatory action aimed at “choking the fiat on-ramps to crypto” are in the pipeline after the Federal Reserve denied Custodia Bank’s application to join the Federal Reserve System, and following the SEC’s decision to issue a Wells notice to Paxos on its issuance of stablecoin Binance USD (BUSD), the report said.

Bernstein asks if this foreshadows action against other major stablecoins such as USD coin (USDC) and tether (USDT) or whether it is specific to BUSD. The regulator sees Binance International as outside of its control and therefore prefers to “rein in BUSD, via Paxos,” Bernstein said.

Such regulatory overreach will result in “further movement towards decentralized finance apps, built on-chain, by anonymous teams,” the note said. Regulators will find it even more challenging to follow this “regulation by enforcement” approach against thousands of DeFi founders without providing a transparent framework.

Growth will continue in more crypto friendly jurisdictions such as Singapore and Dubai, and new potential centers such as Hong Kong and London, the note added.

Read more: What Does Kraken’s SEC Settlement Mean for Crypto Staking?