The Security and Exchange Commission [SEC] has banned Crypto Staking in the USA for retail institutions. SEC also charged Kraken Exchange for running Crypto staking program as a service not as a security. According to SEC, the problem with the Kraken staking is “When crypto investors provide tokens to staking-as-a-service providers, they lose control of those tokens and take on risks associated with those platforms”. This sounds like the Celsius earn program where you don’t own your coins in actual facet.
it’s a concerning development for the crypto industry in the USA. The idea of limiting staking opportunities to only big players goes against the decentralized spirit of the sector. Let’s hope for clarity and fair regulations from the SEC.
If you want to pledge on a centralized platform, you must accept supervision, but you can also choose a decentralized platform, which seems to make the decentralized platform stronger.
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Gary Gensler and the SEC aren’t looking to ban all staking, but rather want to increase the fiduciary responsibility of centralized entities offering staking as a service. The rationale here is that end customers should know where their money is going. Is the institution actually putting those funds to staking? Are they commingling them with another business? Where does the APR come from?
The ruling is actually bullish because this would protect people using these staking as a service provider. It does not mean Ethereum itself would be a security, but rather the derivative tokens these providers are offering. It also likely means that decentralized staking protocols like LidoFinance and Rocketpool are in the clear as the funds transfers are transparent and onchain. You can see directly where your money is going.
It also means self stakers are well in the clear and have nothing to worry about. Sometimes regulation can be good because it legitimizes the investment options we have. It makes them safer and thus more people are likely to invest more in them because they feel protected.
Coinbase says Kraken news will not affect their staking program, Coinbase CLO, Paul Grewal said they’re willing to fight SEC on this issue.
If SEC bans staking on retail, there will be big ripple effects through the multi-billion dollar staking industry including exchanges, infra firms, protocols, derivative tokens, devs, the big VCs, and all is happening a month before withdrawal is enabled.
Adam Carver, CEO at Bitgreen stated on microblogging platform Twitter;
A ban on staking crypto would do irreparable harm to centralized exchanges who are the only ones attentively trying to behave compliantly with US regulation, and move token flow to decentralized platforms that are offshore and hostile to regulation. Not to mention it would suck the wind out of innovation in the US. The only people who like the idea to prohibit staking are Bitcoin maxis because innovation in blockchain happens on chains that aren’t Bitcoin
Crypto exchange Kraken winding off staking services on its platform following SEC charges will encourage stakers to move from CEXs to DEXs and use decentralized staking protocols. Seems SEC thinks they can ban staking in the United States of America but I think they forgot there’s something called VPN.
Big exchanges like Coinbase wouldnt be able to accumulate large token allocations, decentralizing pools as 11% of coinbase’s stock is staking, this can be the momentum shift for the last leg down on Crypto regulations which proves decentralization will spur widespread crypto adoption.
Staking tends to get misconstrued with unrelated activities like lending, but staking is fundamentally a way for anyone to join in providing security for proof of stake networks. The SEC didn’t “ban staking.” The SEC enforced action on financial intermediaries offering, in this case, staking-as-a-service (or: custodial staking) programs, which has nothing to do with non-custodial staking or protocols themselves, Antoni Zolciak Cofounder Aleph Zero noted.
Interestingly, U.S. Rep. Bill Huizenga stated that “since Gary Gensler won’t abide by his own polices to “come in and talk”, the House GOP will hold him accountable.
I’d bet if the SEC got off their asses and defined clear regulation for centralized exchanges, they’d comply. How can the IRS define crypto as property, and SEC call them securities. Stocks aren’t property.
The SEC have allowed so much to continue to happen. Don’t look into Darkpools, Naked Shorting, All Citadel’s businesses are basically monopolizing the stock market and astronomical conflicts of interests. Gary Gensler is legislating through enforcement. He ignores bad actors and shuts down honorable crypto businesses to grab headlines.