SEC Commissioner Pierce: Kraken taking action is not a ‘fair way to regulate’

Yesterday, the Securities and Exchange Commission announced its enforcement action against Kraken, forcing the cryptocurrency exchange to stop its staking service in the US and pay a $30 million fine.

Kraken’s staking service has provided its customers with an opportunity to earn rewards by depositing their cryptocurrencies into various yield-generating protocols, resulting in annual returns of up to 24%.

The SEC complaint alleged that Kraken failed to register its stake as a service with the regulator.

However, the committee’s decision was not unanimous.

Yesterday, Commissioner Hester Pierce, known in the industry as the “Crypto Mom,” shared her disapproval of the SEC’s crackdown, calling such actions “not an efficient or fair way to regulate” a nascent industry.

Referring to Gensler, she said, the SEC “has again elected to speak through an enforcement action, which purports to ‘demonstrate to the market that staking-as-a-service providers must register and provide complete, fair, honest information and investor protection.'”

Pierce also noted that the SEC’s action against Kraken requires it to “provide a betting service in the United States, whether or not it is registered.”

Kraken has not yet responded to DecodeComment request.

What is at stake relative to other exchanges?

While it’s likely that Kraken’s US publishing service will be shut down for good, it’s still not clear if other US companies will be affected.

Hours before the SEC released its press release about the settlement with Kraken, Coinbase CEO Brian Armstrong cited rumors of the crackdown.

Armstrong tweeted that he had heard “rumours” that the SEC wants to ban betting services for retail investors in the US.

However, Coinbase general counsel Paul Grewal told Decrypt that Coinbase was unaffected by the SEC’s action against Kraken, pointing to the differences in the betting services of the two exchanges:

“Bets on Coinbase are still available, and assets stacked continue to earn protocol rewards,” Grewal said. “What is clear from today’s announcement is that Kraken primarily offered a retracement product. Coinbase’s staking services are fundamentally different and are not securities. For example, our clients’ rewards depend on the rewards paid by the protocol and the commissions we disclose.”

Peirce’s dissent also points out that not all these platforms are created equal, adding that “one-time actions and cookie-cutter analytics don’t do it.”