‘Agent of an anti-crypto agenda’ — Community slams Gensler over Kraken crackdown

Crypto Twitter has reacted in anger to the U.S. SEC’s decision to charge Kraken for not registering its staking services. While Kraken settled for $30 million, many believe the SEC has adopted an unjust “regulation by enforcement” approach against the crypto industry.
Brayden Lindrea
Posted by Brayden Lindrea February 10, 2023 3 Mins Read
Crypto Twitter has reacted in anger to the U.S. SEC’s decision to charge Kraken for not registering its staking services. While Kraken settled for $30 million, many believe the SEC has adopted an unjust “regulation by enforcement” approach against the crypto industry.

Members of the crypto community are seemingly outraged over the recent charges laid against crypto exchange Kraken in relation to its staking-as-a-service program in the United States. 

On Feb. 9, the United States Securities Exchange Commission (SEC) announced it had settled charges with Kraken over “failing to register the offer and sale of their crypto asset staking-as-a-service program,” which it claims is qualified as securities under its purview.

Kraken agreed to settle the charges by paying $30 million in fines and to immediately cease the staking services to U.S. retail investors, though it would continue to be offered offshore.

The move appears to have attracted the ire of not only the general crypto community, but also of investors, politicians, and industry executives.

Cinneamhain Ventures partner and Ethereum bull, Adam Cochran called out SEC chief Gary Gensler, describing him as “an agent of an anti-crypto agenda” rather than a regulator while questioning why the same standards weren’t applied to Sam Bankman-Fried and FTX:

In a Feb. 9 statement shared on Twitter, Kristin Smith, CEO of the Blockchain Association suggested the situation at hand is a textbook example as to why Congress — not the SEC — should be working with industry players to forge appropriate legislation:

U.S. Congressman Tom Emmer — who has long been a critic of Gary Gensler — reiterated the importance of staking in the crypto ecosystem.

In a Feb. 9 Twitter post, the lawmaker explained that staking services will play an important role in “building the next generation of the internet” and argued that the “purgatory strategy” will hurt “everyday Americans the most” and that they may soon be forced to fetch for such services offshore.

Meanwhile, Ryan Sean Adams, the founder of the Ethereum show Bankless suggested to his 220,800 Twitter followers on Feb. 9 that the SEC could have taken other measures rather than charging Kraken out of the blue:

Other members of the community questioned how Kraken could possibly have registered with the securities regulator, as there was “no clear path” to approve crypto staking.

Others suggested it could impact Ethereum’s consensus layer, given Kraken is the fourth largest validator on Ethereum, according to on-chain metrics platform Nansen.

Related: ‘Kraken Down’ — SEC commissioner rebukes own agency over recent action

However, not all were against the SEC’s decision. Prominent Bitcoin bull Michael Saylor — who has long considered ETH and other proof-of-stake cryptocurrencies to be securities — agreed with Gensler’s analysis that retail investors “lose control” of their tokens when they’re delegated to external staking service providers:

Meanwhile, attorney and chief policy officer of the Blockchain Association, Jake Chervinsky, noted that such “settlements are not law” and that Kraken’s decision to settle was likely an economic decision rather than a legal one:

The debate comes as the SEC’s charge towards enforcing action against staking service providers prompted Coinbase CEO Brian Armstrong to say that “regulation by enforcement” would be a “terrible path” for U.S. innovators as they’ll be forced to push more of their services offshore.

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