CEO Of Kraken And Crypto Community Strict Criticism Of Staking's Prohibited SEC Action

The SEC's actions led to protests from the crypto community. (Photo; Doc. Coingape)

JAKARTA The actions of US regulators, the Securities and Exchange Commission (SEC) led by Gary Gensler which prohibits staking services on the Kraken crypto exchange have drawn strong criticism from crypto industry players. Some of them are Kraken CEO Jesse Powell and Coinbase Paul Grewal and Cardano founder Charles Hoskinson.

For your information, Staking crypto is a process where users store or "insure" their digital assets on certain platforms to validate transactions and help maintain network integrity. In proof-of-stake networks, selected validators use their assets as a "stake" to validate transactions and create new blocks.

To be a validator, users must have a certain number of digital assets on the platform. After that, they can start the staking process by storing their assets for a certain period of time. A reward for validators is usually in the form of new coins or an increase in interest rate on stored assets.

Jesse Powell strongly criticized Gary Gensler who accused Kraken of not expressing complete risks regarding digital asset staking services on the platform. Previously, Gensler also assessed that Kraken actually knew how to register on the SEC's official website with the necessary terms and regulations, but Kraken was labeled negligent.

Kraken's CEO immediately responded to the allegations by questioning whether his party should notify the public about the origin of the staking reward that came from staking. Powell finds Gensler's accusations against him untrue.

"Oh man, all I have to do is fill out a form on the website and tell people that the staking reward comes from staking? I wish I had seen this video before paying a fine of 30 million US dollars and agreed to permanently shut down this service in the US. How stupid I am. I hope," quipped Kraken boss Jesse Powell.

Crypto industry players made their vocal statements on the matter and proved that the crypto industry would not remain silent on SEC's unfair actions.

According to a DailyHodl report, Coinbase's Chief Legal Officer, Paul Grewal, also responded to the latest developments in the field of crypto staking. In an interview, Grewal stated that staking is a form of legal and necessary investment for digital asset holders, despite the concern of the US Securities and Exchange Commission (SEC).

"The question: Does the underlying crypto protocol really give value to your investment? Or are they just new tokens that hurt the value of the tokens you already have?

Answer: Staking is a way to get rewards by helping to keep blockchain secure. Most networks that rely on staking, including networks supported by Coinbase, reward their users using their own tokens, whose value can go up and down like any other digital asset. Regulations and regulatory formation can address this issue. That's why Congress passed the Administrative Procedures Act initially. Regulation with law enforcement is a bad solution," he said.

Meanwhile, Cardano Creator (ADA), Charles Hoskinson, discussed the less clear nature of the SEC's opinion on crypto staking. Hoskinson stated that the SEC may basically state that Kraken's way of drafting its services violates regulations, but not the underlying asset.

"Obviously there will be a national discussion now on these matters, especially as Kraken and the like are involved. There seems to be no attempt to say that the staking mechanism roughly makes the underlying assets a security. You may see a lot of FUD [fEAR, uncertainty, and doubt] on Twitter, Reddit, and elsewhere that say that if staking is a security, that means its basic assets are securities. Therefore, Ether is now a security. Or ADA is now a security."

Let's be clear: you can take the wheat, which is a commodity, or gold, which is also a commodity, and put it in a package or structure where the package is the securities or activity you do with it. However, it doesn't make wheat or gold a securities. So, you don't have a transitivity where what you do with the stockset can conclude that the underlying asset is problematic. We haven't seen any attempt to do that right now," added Cardano founder Charles Hoskinson.