Crypto exchange Kraken to shutter its U.S. staking operation; settles with SEC for $30 million for selling unregistered securities

After a long battle with the United States Securities and Exchange Commission (SEC), the crypto exchange Kraken agreed to pay $30 million in fines for selling unregistered securities. In addition, Kraken also agreed to shut down its U.S. staking operation and will stop “offering or selling securities” through crypto asset staking services, the SEC said on Thursday.

The $30 million fine is a small potato compared to the alleged $147 million revenue the SEC said Kraken made from the staking operation.

The settlement brings closure to the SEC complaint that Kraken failed to register the offer and sale of the crypto asset staking-as-a-service program. The SEC also alleged that U.S. investors had crypto assets worth over $2.7 billion on Kraken’s platform, which earns Kraken around $147 million in revenue. The SEC also added that more than 135,000 unique U.S. users registered for Kraken’s staking platform.

“Today, we take another step in protecting retail investors by shutting down this unregistered crypto staking program, through which Kraken not only offered investors outsized returns untethered to any economic realities, but also retained the right to pay them no returns at all,” SEC Chair Gary Gensler said in a statement.

The announcement comes just a day after Coinbase CEO Brian Armstrong stated that the US regulator may be aiming to “get rid of crypto staking in the US for retail customers.” “Regulation by enforcement doesn’t work. It encourages companies to operate offshore, which is what happened with FTX,” he wrote on Twitter.

“Whether it’s through staking-as-a-service, lending, or other means, crypto intermediaries, when offering investment contracts in exchange for investors’ tokens,” companies must “provide the proper disclosures and safeguards required by our securities laws,” SEC chair Gary Gensler said in a statement.

The settlement is the latest in a series of SEC actions targeting the crypto industry and comes just weeks after the SEC alleged that crypto lender Genesis and crypto exchange Gemini allegedly offered and sold unregistered securities.

In January, Kraken also shut down its operations in Japan as crypto winter takes a toll on the entire crypto industry.

Founded in 2011 by Jesse Powell, the San Francisco-based Kraken is the 5th-largest crypto exchange by volume, with a 24-hour volume of over half a billion dollars. It provides spot and futures trading between Bitcoin, Ethereum, and over 40 other digital assets.

Meanwhile, Powell recently announced that he would be leaving the role of CEO. Kraken made headlines back in March after Powell fired back at requests to freeze Russian crypto. “If we were going to voluntarily freeze financial accounts of residents of countries unjustly attacking and provoking violence around the world, step 1 would be to freeze all U.S. accounts,” Powell said. “As a practical matter, that’s not really a viable business option for us.”

Kraken also provides a marketplace for digital assets where buyers, sellers, traders, and speculators come together to exchange cryptocurrencies like Bitcoin, Ethereum, Litecoin, and Ripple against national currencies like USD, EUR, CAD, and JPY. The startup currently has over 7 million clients.