Expect the SEC to use its Kraken playbook against staking protocols
The United States Securities and Exchange Commission (SEC) settledwith Kraken on Feb. 9 for an action taken against the exchange’s staking rewards program. Kraken paid a $30 million fine and agreed to halt the program.
Set aside for a moment the irony that the SEC is going after a solvent firm in the crypto space with a decade-long reputation as a good actor. Kraken has been helping settle verified Bitcoin (BTC) claimants from the hacking of rival exchange Mt. Gox over a decade ago. It invented the use of Merkle Root data to create verifiable proof of reserves. It allowed customers to effectively crowdsource audits of the asset side of the balance sheet by verifying what’s in their account against data on-chain.
And while Sam Bankman-Fried urged customers to keep their tokens on FTX for obvious reasons, Kraken founder Jesse Powell has always been a “not your keys, not your coins” guy. Meanwhile, the SEC was asleep on FTX, Terra and Three Arrows Capital. This week the SEC acted like a beat cop who pulls over a commuting soccer mom and throws the book at her to act tough on crime after a streak of robberies.
100% yes it has/will happen and 100% yes, we will be forced to comply. If you're worried about it, don't keep your funds with any centralized/regulated custodian. We cannot protect you. Get your coins/cash out and only trade p2p.
We have to set aside other political hypocrisy in this affair, like politicians decrying proof-of-work (PoW) blockchains yet now seeking to outlaw staking on proof-of-stake (PoS) blockchains. Or that Kraken tried to come into compliance with the SEC by applying for an Alternative Trading System license but got crickets in response.
The SEC emphasized that Kraken’s staking program was custodial,
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