Kraken Agreed to Shutter Crypto-Staking Operations to Settle SEC Charges: Source

Kraken has agreed to shut its cryptocurrency-staking operations to settle charges with the U.S. Securities and Exchange Commission (SEC), according to an industry source briefed on the matter.

The SEC will discuss and vote on the settlement during a closed door commissioner meeting on Thursday afternoon, and an announcement may come later in the day, the industry source told CoinDesk. A second source anticipates an announcement around 4 p.m. New York time (21:00 UTC).

A Kraken spokesperson declined to comment. SEC spokespeople didn’t immediately return requests for comment.

Kraken offers a number of services under its staking umbrella, including a crypto-lending product offering up to 24% yield. This is also expected to shut down under the settlement, the source said.

Kraken’s staking service itself offered a 20% APY, promising to send customers staking rewards twice per week, according to its website.

Bloomberg reported that Kraken was close to a settlement with the SEC over offering unregistered securities on Wednesday.

The vote comes a day after Coinbase CEO Brian Armstrong tweeted that he’d heard rumors the SEC would bar retail customers from engaging in staking, the technique of pledging crypto tokens to run blockchains like Ethereum. The SEC declined to comment on Armstrong’s comments on Wednesday night. Coinbase offers its own staking services.

SEC Chair Gary Gensler has previously said he believed that staking through intermediaries – like Kraken – may meet the requirements of the Howey Test, a decades-old Supreme Court case commonly used as one measure of whether something is a security or not under U.S. laws.

Staking looks similar to lending, Gensler said at the time. The SEC has brought and settled charges with lending companies before, such as now-bankrupt lender BlockFi.

A Kraken settlement would help Gensler’s mission, giving his agency a big win as it continues its efforts to police the broader crypto ecosystem. The majority of people staking on Ethereum, for example, use services, according to Dune Analytics.

Danny Nelson contributed reporting.

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