Crypto Exchange Kraken Accepts $30 million Censure from SEC

Major crypto exchange Kraken has agreed to close its US cryptocurrency staking division and pay a $30 million fine to the Securities and Exchange Commission (SEC), which lodged enforcement action against the firm, saying it was selling unregistered securities.

Staking is when crypto exchanges ask investors to lock up their crypto assets with a blockchain validator, which verifies the accuracy of transactions on the blockchain. Investors can receive additional crypto tokens as a reward for locking away their assets.

The SEC says Kraken should have registered its staking operation as a profit-generating security since it was created as a way for investors to earn money. In recent times, Kraken has staked $2.7 billion of investor assets, earning some $147 million in revenue from over 135,000 unique visitors to its platform.

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

The SEC is turning the heat on the crypto industry, recently targeting crypto lender Genesis and crypto exchange Gemini for allegedly selling unregistered securities.

In the case of Kraken, the SEC says the company promised greater liquidity and extra rewards to investors, thereby transforming its staking platform into an investment opportunity. Kraken promised returns of up to 20% annual percentage yield, claims that were specific enough to force the SEC to act.