Crypto exchange Kraken to shut down staking service for US users, pay $43m in fines

Crypto exchange Kraken has agreed to shut down its cryptocurrency staking service in the United States and pay $30 million ($43 million) in penalties to settle charges that it failed to register the program, in a move that could cause headaches for platforms with similar offers. .

The settlement marks the first crackdown by the US Securities and Exchange Commission (SEC) against staking, a common service offered on both centralized and decentralized crypto exchanges, including most from major exchanges, such as Coinbase and Binance.

What is gambling?

Staking is when the owner of a cryptocurrency puts some of that cryptocurrency up for grabs to allow their computer to participate in the blockchain transaction validation process (ensuring that no one spends the same digital money twice).

It applies to blockchain systems that use a “proof of stake” mechanism for validation, as opposed to the old “proof of work” mechanism that consumes much more power and in which many computers around the world compete to be the fastest in solving a cryptographic problem. equation.

The cryptocurrency "stake" acts as a guarantee that the transactions validated by the owner are legitimate. If the transactions are determined to be invalid, the cryptocurrency can be lost or "hacked."

In exchange for validating transactions, owners who stake cryptocurrency are rewarded with newly created crypto assets.

Exchanges offer regular customers who own cryptocurrencies the opportunity to participate in this process without possessing extensive technical knowledge or a dedicated team.

SEC wants users to be protected

In a video message posted to Twitter on Thursday, SEC Chairman Gary Gensler said that most exchanges offering staking services were failing to provide their clients with proper disclosures, such as how a company was protecting a user's assets.

Those providers should register their participation services with the SEC, he added.