U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler is warning other platforms to “take note” of crypto exchange Kraken’s move to halt its staking service in the country and cough up a $30 million fine.
“Companies like Kraken can offer investment contracts and investment schemes, but they have to have full, fair and truthful disclosure. And this puts the investors who watch your program in a better position. That’s our basic bargain. They were not complying with that basic law,” Gensler said during a Friday appearance on CNBC’s Squawk Box.
When asked by show host Andrew Ross Sorkin how the enforcement action might apply to other yield-earning programs such as crypto exchange Coinbase’s Earn program, Gensler said labels – whether a program is called “lend,” “yield” or “earn” – didn’t matter as much as the underlying economics.
“If somebody’s taking their tokens and transferring it to that platform, the platform controls it and guess what happens if they go bankrupt? You stand in line at the bankruptcy court,” Gensler said, taking aim at the string of bankruptcy cases in progress including that of crypto lender Celsius. A U.S. bankruptcy court judge ruled in January that any crypto deposited on the platform as part of its Earn program belonged to Celsius and not customers.
“There’s a saying in crypto that says not your keys, not your coins. So those other platforms should take note of this and seek to come into compliance, do the proper disclosures and registration and the like,” Gensler added.