Tempers Flare As Some Members Of The SEC Question Their Chairman


  • The SEC’s recent crackdown on staking services has been criticized as “paternalistic and lazy” by Commissioner Hester Peirce.
  • SEC Chairman Gary Gensler sees enforcement as necessary to protect the investing public and prevent companies from breaking the law.
  • The crackdown has sparked a debate about the future oF crypto and staking.

SEC and Crypto: A Controversial Crackdown

The U.S. Securities and Exchange Commission (SEC) has recently taken enforcement action against crypto exchange Kraken over its staking service. The decision was met with criticism from one of the SEC’s own members, Commissioner Hester Peirce, who referred to the enforcement action as “paternalistic and lazy.”

However, SEC Chairman Gary Gensler sees things differently. He dismissed the idea that registration is confusing or untenable for crypto firms, stating that “they know how to do this. They are just choosing not to do it.” Gensler believes that the enforcement action is necessary to protect the investing public and prevent companies from breaking the law.

This controversial crackdown on staking services has sparked a debate about the future of the crypto industry. In this article, we will explore the SEC’s enforcement style, Commissioner Peirce’s views on the matter, and the potential consequences of the crackdown for the crypto industry.

The SEC’s Enforcement Style According to Commissioner Peirce, the fundamental question is not whether Kraken’s staking product should have been registered with the SEC, but whether such registration was at all possible. Peirce believes that the current climate for crypto-related offerings is not conducive to successful SEC registration, with questions surrounding specific disclosures, accounting practices, and whether to register the staking program as a whole or token-by-token still unresolved.

Coinbase CEO Brian Armstrong echoed Commissioner Peirce’s views, stating that his exchange was also given “no way to register” and that the SEC’s “offer” was “disingenuous.”

Suffering in almost silence

Coinbase, has suffered its biggest daily loss in seven months following the SEC’s decision to force rival exchange, Kraken, to shut down its crypto staking services in a $30 million settlement deal. The decline in Coinbase’s value can be attributed to the fact that the exchange generates significant revenue from its crypto staking services, and the SEC’s recent actions have raised concerns about similar actions being taken against Coinbase.

However, Paul Grewal, Coinbase’s Chief Legal Officer, believes that the SEC’s ruling does not apply to the exchange’s staking program. He has stated that Coinbase’s staking program is fundamentally different from the yield product offered by Kraken and is not considered a security.

It is worth noting that Coinbase is the second largest depositor for Ether after the liquid staking protocol Lido, followed by Kraken and Binance. In Q3 2022, staking revenue accounted for 11% of Coinbase’s net revenue, an increase from 8.5% in the previous quarter.

Given these developments, it is crucial for companies operating in the cryptocurrency industry to understand the regulatory environment and ensure that their operations are in compliance with all relevant laws and regulations.

Staking services allow customers to pool their assets into giant staking nodes, which generate yields across different proof of stake blockchain protocols. The profits are then shared between customers and the staking providers they use. Armstrong has argued that staking does not constitute a securities transaction, but the SEC disagrees and has terminated Kraken’s staking business, fining the company $30 million.

Difference of Opinion

The SEC’s enforcement action has led Commissioner Peirce to question its efficiency and fairness. Peirce believes that the use of enforcement actions to inform the industry of the law in an emerging field is not effective regulation and that staking services are too diverse to be subject to cookie-cutter analysis and one-off enforcement actions.

SEC Chairman Gary Gensler, on the other hand, sees enforcement as a necessary tool to protect the investing public. He dismissed the idea that registration is confusing or untenable for crypto firms, stating that companies are choosing not to comply with the law.

Potential Consequences of the Crackdown The recent crackdown on staking services has sparked a debate about the future of the crypto industry. Commissioner Peirce believes that the enforcement action has merely shut down a program that once served people well, and that the SEC’s approach is paternalistic and lazy.

However, some analysts see a silver lining in the crackdown, claiming that it could be positive for decentralized Ethereum and the crypto staking industry as a whole. The SEC’s actions may force crypto companies to become more compliant and transparent, leading to increased investor protection and confidence in the industry.


Kraken’s 24h trading volume has increased by almost 15% despite the recent dispute with the US Securities and Exchange Commission (SEC). Data from CoinMarketCap and CoinGecko shows that the company’s 24h trading volume stands at around $757 million, making it the third most trusted crypto platform after Binance and Coinbase. The recent figures suggest that its performance has not been impacted by the SEC’s recent crackdown.

The SEC probed Kraken over possible violations of rules when offering securities as staking services to US consumers. The agency’s actions against staking services forced the exchange to terminate such offerings and pay $30 million in disgorgement, prejudgment interest, and civil penalties. Despite the problems, Kraken has not reported any wave of withdrawal requests, suggesting that users remain unfazed by the dispute with the American regulator. The news, however, has negatively affected the cryptocurrency sector, with the global crypto market cap dropping by 4% and leading altcoins heading south.

Regardless of the potential consequences, the debate over the SEC’s enforcement style and its impact on the crypto industry is sure to continue.

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