WilmerHale
MONTH-IN-BRIEF (Feb 2023)
Securities Regulation
The SEC Settles with Kraken for $30 Million over Crypto Asset Staking-As-A-Service Program
By Joseph Mayo, LL.M. Candidate at New York University School of Law
On February 9, 2023, the Securities and Exchange Commission announced a settlement with Payward Ventures, Inc. and Payward Trading Ltd., commonly known as Kraken, for the allegedly unregistered offer and sale of crypto asset investment contracts through their Staking-As-A-Service program.
Since cryptocurrency transaction data are recorded on a digital chain of information blocks, they must be validated before being added permanently to the blockchain. Staking cryptocurrency is one mechanism to validate the accuracy and authenticity of the information transferred through the blockchain. It ensures the security and integrity of the cryptocurrency network. By staking, the owners “lock up” their cryptocurrency in a wallet for a certain period. The cryptocurrency then can participate in the network’s consensus mechanism and validate transactions in exchange for tokens. Once their staked crypto token becomes part of the blockchain, owners get rewarded.