Centralized exchange Kraken agreed to stop offering staking services and pay a $30M fine in a closed door commissioner meeting with the SEC on Thursday. Kraken agreed to settle its case after the SEC charged the exchange with “failing to register the offer and sale of their crypto asset staking-as-a-service program.”
It looks like the SEC isn't going to allow exchanges to sell staking-as-a-service to Americans anymore. Staking-as-a-service is where a company stakes your crypto on your behalf and splits the yield with you. Usually, the service that stakes your tokens doesn't have custody of them and can't reimburse you if their staking service provider gets hacked or goes bankrupt, like Genesis did to Gemini Earn's customers.
A lot of the CeFi crypto lending firms that went broke last year were offering staking-as-a-service, and reputable exchanges couldn't resist the yields either. Coinbase, Gemini, BinanceUS, and obviously Kraken all offered some form of crypto staking.
According to SEC Chair Gary Gensler, their move against Kraken “should make clear to the marketplace that staking-as-a-service providers must register and provide full, fair, and truthful disclosure and investor protection.” Ok buddy.
SEC Commissioner Hester Peirce points out that there was not a clear process for providers to register in the first place, adding additional confusion to the SEC’s position.
Normally, I'm happy to see centralized stuff die, but this isn't good for crypto. Normal people don't want to use DeFi wallets to stake and earn yields. Can you imagine your parents depositing into Coinbase, buying crypto, and then staking that crypto on Curve or Aave? I think if there's no staking on CEXs, then a lot of people simply won't stake at all.