Kraken, a San Francisco-based cryptocurrency service, has announced the termination of its crypto-staking services for U.S. customers following a $30 million settlement with the U.S. Securities and Exchange Commission (SEC).
The settlement related to the platform’s “unregistered securities” offering, in which users were given shares in exchange for lending their digital assets from 2017 to 2020. According to the settlement, which was announced on Tuesday and consists of $5 million in penalties and disgorgement, these transactions violated federal securities laws.
As a result, Kraken’s crypto-staking services, which allow users to earn interest on digital assets, will no longer be available for U.S. customers, who will be refunded for any staked digital assets still in their accounts.
The decision comes as one of the biggest-ever settlements between the SEC and a cryptocurrency-focused firm, with the five-year registration period among the longest the agency has imposed on such a firm, according to legal experts. It’s also the first major enforcement action against a cryptocurrency company that the SEC has taken since it took legal action against Ripple Labs in December.
The U.S. regulator has made it clear that it will not treat the nascent cryptocurrency sector differently than the other financial industries it oversees, and that any exchanges or firms operating without registering with the SEC or operating illegally may face serious consequences.
Kraken expressed regret over the incident, claiming that the actions in question were taken “while Kraken was in early stages and the digital asset industry was evolving,” but stated that the settlement reflects the firm’s cooperation with the SEC throughout the investigation.
This decision will likely be one of the first of many for U.S.-based cryptocurrency firms looking to operate lawfully in a regulated industry. Companies across the U.S. will likely be paying more attention to the changing regulations and to their compliance with such regulations in order to avoid similar mistakes.
