SEC View on Cryptocurrency Services
U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler appeared on CNBC’s “Squawk Box” on the 10th and announced the staking-as-a-service of the cryptocurrency exchange Kraken. He explained what he considered to be a violation of the Securities Act.
Gensler points out that Kraken’s problem was that it did not comply with securities law rules to disclose information such as risks to general investors. Other platforms should follow the rules, register with the SEC and make appropriate disclosures before offering services in the U.S., he said.
connection: US SEC “Kraken’s virtual currency staking service violates securities law”
What is staking
A system in which rewards can be obtained by depositing a certain amount of virtual currency for a certain period of time. By contributing to the operation of the blockchain, you can get rewards as compensation.
CNBC’s Andrew Ross Sorkin began by pointing out that the price of Bitcoin (BTC) and other cryptocurrencies fell after Kraken’s staking service was deemed to violate securities laws. Afterwards, he asked how services such as Coinbase, which offers interest rates, differed from Kraken’s staking service.
connection: Whether the Bitcoin plunge has entered an adjustment phase, or a new challenge for the PoS currency that can be staked
In response to this question, Gensler quoted a past U.S. Supreme Court judge saying, “It’s not how the service is called, it’s the underlying economics that matter.” He then said that differences in expressions such as lending and annual interest rates were not important, and explained the economic aspects and risks as follows.
Someone sends a token to a platform, and the platform manages their token. At this point, what if the platform goes bankrupt?
In cryptocurrencies, there is a saying, “If you don’t have the private key, you don’t own the coin.” If the platform goes bankrupt, those who have deposited their tokens will end up in bankruptcy court.
Gensler went on to argue that other platforms should comply with securities laws. The SEC, on the other hand, only focuses on investor protection and is neutral on technology, he said.
Investors can take risks as they please, and Kraken and others explain that if they want to offer investment contract services such as staking, they can register through a form on their website.
connection: U.S. SEC Chairman Gensler “Possibility of PoS-based virtual currency as securities”
Was it possible to register with the SEC?
In this way, Mr. Gensler said that he could register from the website form, claiming that Kraken and other companies knew how to register. He said he was able to file the application, hold discussions with members of the SEC, and communicate with the disclosure review team.
On the other hand, SEC’s Hester Peirce, known as a cryptocurrency advocate, questioned whether the Kraken could have been registered with the SEC in advance. He pointed out that there are many complicated questions about staking services, such as “Do I have to register for each stock?”
Peirce claims to be against dealing with the Kraken. The comments were posted on the SEC’s official website.
According to overseas media, Mr. Peirce took the stage at the University of Pennsylvania conference on the 10th. He also criticized the SEC’s response to continued regulation through enforcement, saying that “we, the SEC, did not try to talk to members of the industry in advance” about staking.
Asked about Peirce’s dissent on CNBC, Gensler explained, “We have a good relationship, we communicate regularly and we discuss things like staking.”
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