Kraken exchange shut down their staking services to U.S. customers last week after pressure from U.S. regulators.
With Kraken out of the way, the SEC has their eyes on stablecoins like BUSD, USDC and other staking services from leading exchanges such as Coinbase.
According to the SEC, the overwhelming majority of staking services and stablecoins on the market are unregistered securities.
The SEC vs Crypto
The SEC claimed that the Kraken exchange was selling unregistered securities through its staking service and demanded that the exchange suspended its staking services for U.S. customers.
Last week, Coinbase CEO Brian Armstrong warned that the SEC would strike against retail crypto staking a day before Kraken exchange’s own staking services went down.
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Armstrong believed the U.S.’s decision to stifle the growth of emerging technologies and crypto will be a “terrible path” for regulators to go down.
On February 12 Brian Armstrong Tweeted a Coinbase blog that explained why Coinbase’s staking services were not securities.
Staking is not a security under the US Securities Act, nor under the Howey test. Trying to superimpose securities law onto a process like staking doesn’t help consumers at all and instead imposes unnecessarily aggressive mandates that will prevent US consumers from accessing basic crypto services and push users to offshore, unregulated platforms.
The Howey Test is used to determine whether a transaction qualifies as an investment.
Formal notices from regulators were sent to stablecoin issuers Paxos (Binance, BUSD) and Circle (USDC) to inform them about future enforcement actions that may be brought against them and their operations.