Information about the ban on staking on cryptocurrency exchange Kraken for US users emerged yesterday. As part of the case, representatives of the trading platform opted not to conduct proceedings, but to get rid of the function immediately and pay the fine. In that case, they neither admitted nor denied their guilt.

Why cryptocurrency staking was banned

Cinneamhain Ventures partner and long-time Etherium fan Adam Cochran addressed SEC chief Gary Gensler, calling him an “agent of the anti-cryptocurrency agenda” rather than a regulator. He also questioned why the SEC didn’t speak with the same vehemence against the bankrupt FTX in its time. Here is his rejoinder.

So, the SEC befriended former FTX executive Sam Bankman-Fried and almost gave him an indulgence to expand US business. But then the regulator starts going after two of the most law-abiding Kraken and Coinbase for services on which the SEC had previously refused to make recommendations?

Note that the SEC does not really share any guidance on how to do business. In other words, companies don't know what actions and activities may be prohibited at the regulator's behest, with some of them finding out after the fact and with heavy fines. Naturally, this is far from the best environment in which to operate.

SEC chief Gary Gensler

According to Cointelegraph’s sources, the head of the Blockchain Association, Christine Smith, has also spoken out in favour of additional oversight of Commission policy. Here’s her quote.

Steering is an important part of the cryptocurrency ecosystem, it allows participation in decentralised networks and provides investors with more passive income opportunities. Today’s decision is not law, but it’s another example of why we need Congress to define appropriate legislation for this new technology.

Christine Smith’s statement

Popular cryptocurrency fan and co-creator of the Bankless podcast Ryan Adams has advised Gensler to pay more attention to the really important things within the powers of the regulator. Here’s his quote.

You could have:

– Require mandatory confirmation of exchange reserves;
– Require transparency of staking;
– Support decentralised staking.

Instead we just got another hammer blow to the head from Gary Gensler. And we have no assurance that you won’t come after decentralised steaking next time. You are facilitating the offshoring of funds.

Ryan makes it clear that such regulatory activity, together with a lack of clear rules of operation, will force businesses to go to other jurisdictions. At the same time, the development of decentralised assets in the US will be severely hampered.

Even within the Commission itself, there has been serious criticism of the regulator’s actions. The arguments of the cryptocurrency community were supported by Commission member Hester Pearce – she publicly rebuked her agency for restrictions against Kraken. Coercive regulation “is not an effective or fair way to control” an emerging industry, Pearce said. Here’s her rejoinder.

Today, the SEC shut down staking on Kraken and deemed it a victory for investors. I do not agree with this decision and therefore protest.

SEC Commissioner Hester Pearce

The commission should have approached this issue after a comprehensive analysis of the industry, says Pearce.

Using enforcement action to push the law on people within a burgeoning industry is not an effective or fair way to regulate. Moreover, steaking itself is not a single service, so one-off enforcement actions and boilerplate analysis are not appropriate.

Steaking on Kraken is still available outside the US

Pearce suggested the SEC initiate a “public process to develop a workable registration process that provides valuable information for investors”. Coinbase CEO Brian Armstrong agreed with Hester’s comments and supported her view. As a reminder, he too had previously criticised the Commission’s actions and warned of its campaign against Kraken.


It should be noted that in theory the position of the SEC management can be understood. As it became clear thanks to a fresh video of the regulator, it is not satisfied with the fact that it promises certain percentages and the lack of details on how exactly companies use users' coins. That is, the ban in this case applies to platforms that are not just intermediaries for aggregating users' cryptocurrencies and sending them into the stack. In fact, that's why the steaking for US residents on Kraken is over, but not on Coinbase.

As Gary Gensler pointed out, it's not known exactly how the companies use the coins users receive. Perhaps they send them for loans or something else - and that's the clarification the Commission wants.



We don't think the current situation is as bad as it may seem. Still, SEC officials have only opposed platforms that support staking as a service. That is, they don't send users' coins to staking, but can use them in other ways to generate revenue.

In this case, the agency's decision is sure to motivate cryptocurrency enthusiasts to engage in unmediated steaking, which is the right thing to do. If anything, there are instructions on how to do so here.


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