Staking directly on the protocol and via Kraken are two completely different stories, said CEO Cardano Hoskinson.
According to Charles Hoskinson – Input Output (IO) CEO and behind the Cardano blockchain, the SEC was right to “chase” Kraken’s staking program.
Kraken SEC Settlement https://t.co/HxzesbQGZY
— Charles Hoskinson (@IOHK_Charles) February 14, 2023
In one live stream On February 14, Hoskinson gave a view on enforcement action between the SEC and Kraken exchange, based on file which the regulator has submitted to the court.
Drawing from the document, CEO Cardano believes that the SEC does not actually have a problem with the staking program. However, staking through Kraken is a completely different case and the exchange itself is not a staking protocol.
“If you actually read through the document and the complaint, the SEC is actually saying that Kraken was wrong in building a proprietary in-house product, but the essence is in the protocol.”
CEO Hoskinson explains it well and uses Cardano (ADA) as an example:
– Job direct staking require users (or delegators) to pledge/lock their ADA tokens to an optional Stake Pool Operator (SPO). Accordingly, the delegator still has access to the token and is allowed to withdraw from the SPO at any time.
– However, if this process is carried out via Krakenit means that the user waives custody of the ADA, the right to make decisions, and control over his or her funds.
From there, risks can arise from a third-party custodian, management or mechanism of the liquidity system/reserve pool. In summary, it is clear that the regulator is only targeting Kraken’s internal staking products and considers them potentially risky for users.
As Cointelegraph reported, the United States Securities and Exchange Commission (SEC) has order Kraken to stop staking services permanently in the US and pay a civil penalty of 30 million USD with interest. The SEC concluded that the staking product was unregistered and constitutes a security contract. This move has made the crypto community bewildered when it thinks that this is a sign of an upcoming crackdown. Coinbase CEO also mentioned the possibility that the SEC will soon ban this type of business.