A one-off or opening salvo in an assault on crypto?

In a year of crypto upheavals, the United States Securities and Exchange Commission’s settlement with crypto exchange Kraken, announced on Feb. 9, set off yet another tremor. Agency chief Gary Gensler took to mainstream media last week to explain the agency’s action, which seemed to be an attack on crypto staking — part of the validation mechanism used by a number of blockchain platforms, including Ethereum, the world’s second-largest network. 

The immediate issue, in the agency’s view, was that Kraken had been selling unregistered investment products. Indeed, it was advertising big returns on staking crypto — up to 21%, Gensler told CNBC.com.

“The problem was they were not disclosing to the investing public the risks that the investing public were entering into,” Gensler said. Moreover, the SEC’s action, which required Kraken to shell out $30 million and shut down its staking operation, could have been easily avoided, he seemed to imply:

“Kraken knew how to register, others know how to register. It’s just a form on our website. They can come in, talk to our talented people on disclosure review teams. And if they want to offer staking, we’re neutral. Come in and register, because investors need that disclosure.”

Not all in the crypto industry were totally satisfied with this response, however. “I find the SEC’s ‘all crypto projects have to do is come in and register’ line unbelievably insulting,” tweeted Morrison Cohen LLP attorney Jason Gottlieb. “There is simply no path to registration for many crypto products.”

I find the SEC’s “all crypto projects have to do is come in and register” line unbelievably insulting.

It assumes there’s this vast quantity of sophisticated securities lawyers advising clients, “nah man, screw the SEC, yolo baby, do whatever you want.” 1/6

— Jason Gottlieb (@ohaiom) February 11, 2023

“The registration of staking program securities is not as simple as filing a form on the SEC’s website,” Michael Selig, an attorney with Willkie Farr & Gallagher LLP, told Cointelegraph. “Public offerings of securities are heavily regulated and expensive to conduct.”

Others view the agency’s decision to charge Kraken as the first salvo in a general assault on crypto by U.S. regulators. “If approved by a court, the settlement marks a potential turning point for cryptocurrency regulation and the SEC’s broader efforts to bring the industry under its jurisdiction,” reported CNN. “The…