Kraken CEO Jesse Powell and Coinbase’s chief legal officer Paul Grewal are vocally criticizing the U.S. Securities and Exchange’s (SEC) latest enforcement action against crypto staking.
SEC chair Gary Gensler told CNBC in an interview that Kraken was not disclosing to the public the complete risks associated with staking their digital assets on the platform
Gensler said that Kraken “knew how to register” on the SEC website for the necessary regulatory requirements, but neglected to do so.
In response, Powell implied that Gensler’s claim was untrue.
“Oh man, all I had to do was fill out a form on a website and tell people that staking rewards come from staking? Wish I’d seen this video before paying a $30 million fine and agreeing to permanently shut down the service in the US. How dumb do I look. Gosh.”
Coinbase chief legal officer Paul Grewal also chimes in on the developments, addressing some of the common questions regarding crypto staking. Grewal says that staking is a necessary and legitimate form of investment for digital asset holders, regardless of SEC scrutiny.
“Questions: Are the underlying crypto protocols genuinely creating value on your investment? Or are they just new tokens that dilute the value of the ones you already have?
Answers: Staking is a way to earn rewards by helping to secure a blockchain. Most networks that rely on staking – including all that we support– reward users using their own token, which can rise and fall in value like any other digital asset.
Rules and rulemaking could and would address all of this. That’s why, after all, Congress passed the Administrative Procedure Act in the first place. Regulation by enforcement is a poor substitute.”
Cardano (ADA) creator Charles Hoskinson addressed the seemingly unclear nature of the SEC’s stance on crypto staking. Hoskinson said that the SEC may essentially be declaring that the way Kraken structured its staking service violates regulations, but not the underlying assets themselves.
“Obviously there’s going to be a national discussion now about these things, especially now that Kraken and others are getting involved. It does not appear that there’s any attempt to say, ‘Oh well, staking mechanics somehow now make the underlying asset a security.’ You’ll probably see a lot of FUD [fear, uncertainty and doubt] over Twitter, Reddit and other places saying, ‘Oh well, if staking is a security that must mean the underlying asset is. So Ether is now a security. Or ADA is now a security.’
Let’s be very clear: you can take wheat, which is a commodity, or gold, a commodity, and put it into some sort of package or structuring where that package is a security or that activity that you’re doing with it is regulated. But that doesn’t make wheat or gold a security. So you don’t have that transitivity there where what you do with stake pools could infer the underlying asset has a problem. We haven’t seen any attempt to do that at the moment.”
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