Crypto exchange Kraken will shutter its U.S. cryptocurrency staking operation and pay a $30 million fine to settle an enforcement action alleging it sold unregistered securities, the Securities and Exchange Commission said Thursday.
The SEC alleged Kraken failed to register the offer and sale of Kraken’s crypto staking-as-a-service program.
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Many centralized exchanges like Kraken and Gemini offer customers the option to stake their tokens in order to earn yield on their digital assets that would otherise sit idle on the platform. With crypto staking, investors typically vault 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 those assets.
Kraken advertised on its website returns of up to 20% annual percentage yield through its staking product. The exchange also promised on its website to deliver those rewards to customers twice per week.
“Whether it’s through staking-as-a-service, lending, or other means, crypto intermediaries, when offering investment contracts in exchange for investors’ tokens, need to provide the proper disclosures and safeguards required by our securities laws,” SEC chair Gary Gensler said in a statement.
Kraken did not admit or denying the allegations made in the SEC’s complaint.
It’s the latest in a series of SEC actions targeting the crypto industry and comes just weeks after the SEC alleged that crypto lender Genesis and crypto exchange Gemini allegedly offered and sold unregistered securities.
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