Kraken move should put crypto industry 'on notice,' Gensler says

Securities and Exchange Commission Chair Gary Gensler sent another warning shot to the crypto industry this morning, just a day after the regulator said it settled with the Kraken exchange over allegations surrounding its staking program. 

“This really should put everyone on notice in this marketplace whether you call it lend, whether you call it earn, whether you call it yield, whether you offer what’s called an annual percentage yield, APY,” Gensler said on CNBC.

The SEC said Thursday that crypto intermediaries needed to provide "proper disclosures and safeguards required by our securities laws" when offering services such as lending or staking. Kraken subsequently agreed to end its on-chain staking services for U.S. clients only without admitting or denying the allegations.  

“Those other platforms should take note of this and seek to come into compliance,” Gensler said Friday.

Backlash

The move promoted an immediate backlash, with SEC Commissioner Hester Peirce, a longtime crypto advocate, saying she disagreed with the commission's action in a dissenting statement in which she argued that using enforcement actions to set law in an emerging industry is not "efficient or fair." Gensler said Peirce and him “chat regularly” when he was asked about those comments on Friday. 

The settlement signaled an aggressive move by the SEC, some experts said on Thursday, calling it a “bad sign for ‘staking as a service’ as it’s currently offered in the United States.” 

The development follows multiple enforcement actions this year. On Jan. 12, the agency charged both Gemini and Genesis with the unregistered offering and sale of securities through the Gemini Earn lending program.