Gary Gensler, Chairman of the United States Securities and Exchange Commission, attempted to cast new staking restrictions in a positive light during a video on February 9.
Gensler says disclosures will benefit investors
In his “Office Hours” series on YouTube, Gensler said:
“When you sign on the dotted line or agree to the Terms of Service, you generally agree that placing your tokens with these providers may mean transferring your ownership to them. There is an expression… “not your keys not your crypto.”
Many investors are cautious about depositing funds on a centralized exchange, using this same slogan as a reminder that exchanges can restrict access to their funds.
Gensler said similar concerns should extend to staking programs offered by exchanges and other companies. He said investors should consider whether centralized services are really staking their deposited assets. Some services may lend deposited assets or mix assets with other businesses. Other services may not give investors their fair share of returns, or they may dilute the value of assets that investors already own.
Gensler added that these concerns apply to staking programs and interest-bearing products, whatever their name, including earning, rewards and APY programs.
He said a widespread lack of proper disclosure means there is currently no way for investors to find answers to the above questions and concerns. That, he said, is why the SEC wants companies to comply with securities laws.
Concerns are circulating over a staking ban
While Gensler’s statements imply that crypto firms can comply with regulations, the SEC’s sudden move to impose unclear rules may amount to a de facto ban.
SEC Commissioner Hester Peirce expressed that concern today. After Kraken announced it would shut down its US staking service as part of an SEC settlement, Peirce wrote that it might not have been possible for Kraken to register properly.
She says that crypto apps “don’t go through the SEC’s registration pipeline” and that it’s concerning that the SEC is shutting down a service that “has served people well.”
Elsewhere, Coinbase CEO Brian Armstrong said he’s heard the SEC wants to “get rid of crypto staking in the US for retail customers.”
General Counsel Paul Grewal told Bloomberg today that Coinbase plans to continue offering its staking services, which it says are different from Kraken. Unverified rumors also suggest that Coinbase could fight the SEC if they try to interfere with the service.
These developments indicate that the SEC is taking a tough stance on staking. Still, the SEC could eventually create a landscape in which staking services can operate.
The current rules also appear to allow room for decentralized on-chain staking on blockchains like Ethereum, although the SEC has not explicitly endorsed the practice.