Cryptocurrency exchange Kraken has agreed to immediately end its cryptocurrency staking-as-a-service platform for U.S. customers as part of a settlement agreement reached with the U.S. Securities and Exchange Commission (SEC).
Kraken has also agreed to pay a $30 million U.S. fine to settle charges it offered unregistered securities to investors.
The Kraken exchange had offered investors public access to cryptocurrency staking services since 2019. Staking is the process by which proof-of-stake blockchain networks such as Ethereum (ETH) maintain their security.
In the staking process, a network’s decentralized validators post cryptocurrency as a form of collateral to attest that they’ll be honest brokers. In return for processing transactions, investors get rewarded with yield and more tokens.
While Kraken’s website offered a 20% yield on its staking service, the SEC suggested it was as high as 21%.
In a blog post, Kraken said that it would end any assets staked by U.S. clients except for staked Ethereum, which won’t be ended until after the latest upgrade to the Ethereum network is completed later this year.
Going forward, U.S. clients will also be unable to stake new assets, including Ethereum. Non-U.S. clients of Kraken are not impacted by the latest changes.
The SEC said Kraken’s staking service was too risky and provided little protection to investors.
Rival cryptocurrency exchange Coinbase (COIN) also offers staking services to customers. On Twitter, Coinbase Chief Executive Officer (CEO) Brian Armstrong said that the SEC is likely to end all crypto staking in the U.S., comments that hurt investor sentiment.
The price of Bitcoin has fallen below $22,000 U.S. in recent days after rallying 40% to start the year.
