SEC chair issues warning to crypto firms after action on Kraken staking

“Don’t have your hand in the customer’s pocket, using their funds for your own platform,” Gary Gensler said to companies that needed to register with the SEC.

United States Securities and Exchange Commission chair Gary Gensler issued a warning to crypto companies to “come in and follow the law” after the agency announced a settlement with crypto exchange Kraken.

Appearing on CNBC’s ‘Squawk Box’ on Feb. 10, Gensler said crypto exchanges should register with the SEC in order to be compliant with regulations in the United States, claiming that many within the industry were “choosing” not to do so. According to the SEC chair, the business models of many crypto projects were “rife with conflict,” claiming they needed to “disentangle” bundled products.

“If this field has any chance of survival and success, it’s time-tested rules and laws to protect the investing public,” said Gensler. “Don’t have your hand in the customer’s pocket, using their funds for your own platform.”

“The storefronts and casinos people are investing in need to comply and disentangle bundled products. The business model is rife with conflicts,” says SEC Chair @GaryGensler on #crypto. “If this field has a chance of survival, it needs laws to protect the investing public.” pic.twitter.com/FGRrYE1Aov

— Squawk Box (@SquawkCNBC) February 10, 2023

Gensler’s statement followed the SEC announcing it had reached a settlement with Kraken in which the exchange agreed to shut down its staking services and programs for U.S. customers as well as pay $30 million in disgorgement, prejudgment interest and civil penalties. Kraken said it would continue to offer staking services for non-U.S. users through a separate subsidiary.

Related: Community urges Coinbase to relist XRP as CEO fights for staking

Many have criticized the SEC settlement as regulators taking action against firms that need to navigate a regulatory space without clear guidelines. SEC commissioner Hester Peirce called the SEC’s actions “lazy and paternalistic”, saying the staking program had “served people well.”