The recent shutdown of Kraken’s staking program by the Securities and Exchange Commission (SEC) has caused a wave of controversy within the regulator’s ranks.
While the SEC considered the shutdown a win for investors, one of its commissioners, Hester Pierce, has expressed dissent on the matter.
Kraken, one of the largest cryptocurrency exchanges in the world, operated a staking program through which its customers could offer their tokens for staking.
Customers who contributed their tokens to the exchange were rewarded with returns, and Kraken was compensated for providing the service via a charge.
The regulatory agency argued that the staking program should have been registered with the regulator as a securities offering, raising questions about the feasibility of registering such programs with the SEC in the current regulatory climate.
The SEC’s stance on crypto staking programs has been a topic of criticism, with Commissioner Pierce leading the charge. In her iconoclastic statement, she pointed out that the agency should have issued guidance on staking programs long ago instead of speaking through enforcement actions.
She believes that one-off enforcement actions are not efficient or fairways of regulating the emerging crypto industry. Furthermore, she argues that staking services are not uniform and thus cannot be regulated through cookie-cutter analysis.
The shutdown of Kraken’s staking program has significant implications for the crypto industry. The program is no longer available in the United States, and Kraken has been enjoined from ever offering a staking service in the country, registered or not.
Pierce argues that this solution to a registration violation, which is to shut down a program that has served people well, is paternalistic and lazy.
She believes that the SEC should have initiated a public process to develop a workable registration process that would have provided valuable information to investors.
SEC’s move causes tension in the industry
Following the termination of Kraken’s staking program, doubts have been raised about the trajectory of other cryptocurrency staking programs and the role that the SEC will play in regulating them.
While more openness around such initiatives would be desirable, it is still unclear if a universal regulatory solution is required and whether the SEC, with its long history of animosity towards cryptocurrencies, is the appropriate authority to deliver such a solution.
The contrary opinion of Pierce underlines the necessity for a comprehensive investigation into the position that the agency takes on cryptocurrency staking programs and the effect its actions have on the cryptocurrency sector.
Two of the most pressing issues for the cryptocurrency industry are the aftereffects of the shutdown and the trajectory of staking programs.
Before taking any more steps in this general direction, the agency should first evaluate the ramifications of its actions on the sector and then determine whether or not clear and consistent regulation is essential in this particular area.
The regulatory body will only be able to guarantee that it is serving the interests of investors and the larger crypto community if it conducts a comprehensive investigation of the problems that are now at hand.