Regulatory rumblings are hitting the crypto sector once again. Notable exchange Kraken has reached a deal with SEC that will shutter its crypto staking platform, which allows investors to earn a yield by temporarily depositing their tokens with an intermediary or crypto network to facilitate blockchain transactions. A $30M settlement was also reached over Kraken's failure to register the program, causing further jitters elsewhere in the sector. Shares of rival crypto exchange Coinbase ( NASDAQ: COIN ) slumped 14% on Thursday, with CEO Brian Armstrong saying the SEC may want to get rid of crypto staking for retail customers entirely. "Staking is a really important innovation in crypto. It allows users to participate directly in running open crypto networks," Armstrong wrote in a series of tweets. "Staking is not a security... Regulation by enforcement doesn't work. It encourages companies to operate offshore, which is what happened with FTX. Hopefully we can work together to publish clear rules for the industry, and come up with sensible solutions that protect consumers while preserving innovation and national security interests in the U.S." Coinbase ( COIN ) reported $62M in revenue from "blockchain rewards," which include staking, in the third quarter of 2022, accounting for roughly 10% of its total revenue for the period.
