After Kraken's staking service ended, clients' 1.23 million ETH staked assets became their responsibility.
Given January 2023's soaring cryptocurrency valuations, regulatory pushback may be forthcoming.
The SEC's settlement with Kraken dealt the cryptocurrency sector a blow.
The responsibility now falls on the 1.23 million ETH staked assets that belong to consumers after cryptocurrency exchange Kraken announced the termination of its staking service. The unstaking would only be permitted with the planned Shanghai upgrade, according to the exchange. The SEC's assault on Kraken had a significant impact on the cryptocurrency market after the settlement caused a price drop due to concerns about a staking prohibition. The effect was particularly pronounced in proof-of-stake based cryptocurrencies because these tokens are directly impacted by the SEC's opposition to crypto staking.
Kraken was accused by the SEC of not registering the offer and sale of its cryptocurrency staking programme. The exchange responded by offering to stop the staking service and pay $30 million in fines. Because of worries of additional regulatory action against other crypto exchanges, this caused the crypto market to drop. In essence, the SEC is discouraging the staking programme because the exchanges lack the necessary controls and disclosures required by securities laws.
As worries about a potential price drop increase, there is currently an underlying attitude of buying the dip. In the near future, there might be resistance to the regulatory push, though, given the favourable situation with rising cryptocurrency values seen in January 2023. Additionally, Ethereum (ETH) traders were expecting a large gain in the wake of the March 2023 Shanghai upgrade.
On the other hand, more regulation of cryptocurrency exchanges may lead to traders favouring investments in Bitcoin, which is well-known for defying regulation. In addition, because the exchange holds a 7.5% ownership in any ETH staked, Kraken's exit from the staking area may cause concern for many customers.
