SEC Guidance is Needed Says Jesse Powell After Kraken Settlement

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• Kraken CEO Jesse Powell has called for guidance from the SEC after agreeing a $30 million settlement
• Kraken will cease its staking-as-a-service platform for U.S. customers after the SEC raised security concerns
• The news comes less than a day after warnings that the SEC wants to ban staking

Kraken’s outgoing CEO Jesse Powell has said that the Securities and Exchange Commission (SEC) needs to offer guidance on the status of cryptocurrency products, following Kraken’s $30 million settlement over its staking-as-a-service program. The news that Kraken had settled with the SEC and agreed to terminate its service for U.S. customers over concerns that it represents an unregistered sale of securities came less than 24 hours after Coinbase CEO Brian Armstrong warned that the agency is looking to ban staking outright along the same grounds.

Kraken Pays $30 Million in SEC Settlement

Armstrong’s comments yesterday barely had time to percolate before Kraken had announced that it had come to a settlement with the SEC where it would cease its staking-as-a-service program immediately in the U.S. and pay a $30 million settlement fee, without admitting guilt in the matter. A second Kraken subsidiary will handle all staking for non-U.S. entities, while all U.S. stakers will have their funds unstaked and returned to them.

Powell took to Twitter to respond to comments from individuals such as SEC commissioner Hester Pierce, pro-crypto congressman Tom Emmer, and Coinbase’s chief legal officer Paul Grewal, where he urged the SEC to offer up-front guidance to crypto companies rather than adopting a ‘try it and see what you get’ approach:

Thank you. Some guidance would be appreciated. The “This is wrong but I won’t tell you how to do it right. Want to find out if X works? Try it and see what happens.” approach does not help the industry nor consumers. We aren’t anti-regulation but we need a clear path to operate. https://t.co/KmOVkUi49r

— Jesse Powell (@jespow) February 9, 2023

Others have complained of this approach by the SEC in the past, most notably Grewal and Armstrong, who faced the SEC’s wrath over their intended Coinbase Lend program, which died when the SEC threatened legal action after Coinbase had gone to them for advice.

IRS Demands Kraken Books

Things got worse for Kraken just minutes after news of the SEC settlement was made public – the exchange is also the subject of enforcement action by the Inland Revenue Service (IRS) for failing to provide it with certain information:

Despite discussions between the parties, Payward Ventures Inc. & Subsidiaries has failed to comply with the summons and has not produced the books, records, papers and other data demanded in the summons. Payward Ventures Inc. & Subsidiaries’ failure to comply with the summons continues to this date.

The intention is to boost an IRS investigation into the “income tax liability of U.S. persons who conducted transactions in cryptocurrency for the years ended December 31, 2016, 2017, 2018, 2019, and 2020.”

Such a move will concern those who traded around these times and didn’t keep records or pay taxes, thinking that it would never come back to get them, as this action shows that the IRS is taking prior crypto activities very seriously.