As if we needed another reminder of why blockchain technology is such a critical innovation in the face of authoritarian government overreach, the SEC’s recent $30 million settlement with cryptocurrency exchange Kraken is a perfect example, capturing the attention of crypto enthusiasts around the world.
In summary, Kraken, along with at least a dozen other US-facing exchanges, offer “staking” services to their customers. In layman’s terms, this can be compared to interest earned on a savings account in a traditional bank. Crypto holders receive a few-percent bonus for temporarily locking up their crypto in order to secure the underlying blockchain.
Last week, however, the SEC not only fined Kraken for the egregious “crime” of not offering complete disclosures as to where this bonus comes from, but also permanently banned them from offering staking products to American customers again—even after they provide the newly required disclosures.
The most obvious problems with this: 1) there was no harm to anyone, as Kraken has never had any issues making these yield payments to customers; 2) most US exchanges (such as Coinbase, Gemini, and Okcoin) offer the same staking services, with the same lack of detailed disclosures; and 3) all of these other exchanges will simply be able to update their terms of service (you know, the ones no one reads) with the new disclosures and continue business as usual, while Kraken pays a $30 million fine and is forever barred from providing this service again….