Gary Gensler, the Chairman of the U.S. Securities and Exchange Commission, has recently issued a cautionary statement to other crypto platforms in the wake of Kraken’s decision to halt its staking service and pay a $30 million fine.
He emphasized the importance of transparency and fairness in the industry, stating that companies such as Kraken must provide accurate information to their investors.
Gensler also stressed the SEC’s role in ensuring compliance with basic laws and regulations that protect investors, stating that the SEC’s basic bargain is to provide a level playing field for everyone and to ensure that investors can get the information they need to make informed decisions.
Kraken’s actions serve as a reminder to other companies in the industry that they must adhere to these fundamental principles, and the SEC will take action against those who do not comply.
Possible Impact of the SEC’s Enforcement Actions
When questioned about the potential impact of the enforcement action on other yield-generating programs, Gensler said that the terminology used to describe these programs is not as important as the underlying economic principles.
He pointed out the potential risks associated with yield-generating programs and highlighted the consequences of platform failure, such as bankruptcy.
In addition, Gensler referenced the ongoing bankruptcy proceedings of Celsius Network, where a U.S. bankruptcy court judge ruled that any crypto deposited on the platform as part of its Earn program belonged to the company and not its customers.
The SEC’s chairman concluded by warning other platforms to take heed of the enforcement action against Kraken and comply with regulatory requirements, including proper disclosures and registration.
He emphasized the importance of companies taking responsibility for their actions and ensuring that they operate in an ethical and transparent manner.
What if Crypto Staking Companies Move Elsewhere?
Some people pointed out that although the SEC has taken action against crypto staking in the U.S., it’s possible for companies to simply move their operations to other jurisdictions and continue to offer these services.
Gensler acknowledged this possibility but emphasized the importance of companies being transparent and fair with American investors. He stated that the SEC is neutral towards crypto staking but stressed that companies must register and provide full disclosure to investors.
Enforcement Actions Being Met With Criticism
The enforcement action taken by the SEC against Kraken has been met with criticism, including from within the agency. SEC Commissioner Hester Peirce called it a lazy move and expressed concern that the solution to a registration violation was to shut down an otherwise successful program.
Gary Gensler emphasized that the SEC is using all the tools at its disposal to ensure compliance and is directly communicating with market participants. When asked if the SEC’s goal is to keep crypto out of the mainstream financial system, he stated that the regulator is technology neutral.
He emphasized that for the crypto industry to have a chance at survival and success, it must follow time-tested rules and laws that protect investors and ensure fair and truthful disclosure.
He added that businesses must address conflicts of interest and avoid using customer funds or their own funds in a manner that puts their hand in the customer’s pocket.
The Possibility of BTC Exchange Traded Funds
The SEC’s chairman was asked about the potential for a bitcoin exchange-traded fund to give investors access to the crypto market via traditional exchange platforms at market prices.
Although he did not explicitly state why this path forward is viable, he did mention that well-established tech companies such as Apple know how to properly register their offerings.
Gensler acknowledged the recent bankruptcy proceedings of the collapsed crypto exchange FTX and the U.S. fraud charges against its founder and emphasized the importance of protecting the investing public.
While the steps taken by the SEC have been polarizing, it does prove that it is taking steps to ensure that the crypto trading sphere is an equal playing field for everyone.