Kraken’s Staking Ban Is Another Nail In The Coffin For Cryptos And That’s A Good Thing

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Rumors of an impending crypto ban came to fruition on February 9 with the Securities and Exchange Commissions enforcement action against Kraken, which resulted in a settlement in which the exchange agreed to end its staking services. for US users. The action will likely extend to all US-based companies.

The reactions were predictable depending on your stance on crypto in general. Crypto advocates railed against regulators slowly suffocating this burgeoning industry, while skeptics celebrated crypto’s impending demise. The lawyers are right. Adversarial regulators will force crypto into friendlier jurisdictions, which will reap the economic benefits. Skeptics are also right. This event, and many of those from the past year, are killing crypto. Their apparent joy is misplaced, however. This is a good thing.

Emboldened by the multitude of crypto business explosions in 2022, the SEC and the Commodities Futures Trading Commission have begun to take an increasingly hard line with the crypto industry. They targeted fiat on-ramps through US banks. They are now aiming for staking. Brian Armstrong, CEO of centralized exchange Coinbase, hinted on February 9 that the SEC would like to get rid of crypto staking in the United States for retail customers. A day later, Kraken announced that it would shut down its staking program as a service and pay a $30 million fine. It now seems likely that something akin to a staking ban will extend to all US-based companies.

Armstrong rightly said in his tweets that a staking ban would be a terrible path for the United States if allowed. If US regulators press too hard, they could be responsible for the US giving ground in the crypto industry to other countries. Better stop now because crypto companies are already leaving the United States.

1/ We hear rumors that the SEC would like to get rid of crypto staking in the United States for retail customers. I hope it’s not, because I think it would be a terrible path for the United States if allowed.

— Brian Armstrong (@brian_armstrong) February 8, 2023

The latest action by the SEC is even drawing criticism from within the SEC. Commissioner Hester Peirce objected to the recklessness of this enforcement action, saying that using enforcement to tell people what the law is in an emerging industry is not an effective or fair way to regulate. It creates uncertainty and hinders investment. What is needed are fair and clear rules. Without it, US leadership in crypto will fade.

However, banning staking is good for crypto.

Good riddance.

Related: My Story of Telling the SEC I Told You About FTX

Staking with an incorporated business is contrary to what makes crypto special. Staking is used to secure global networks like Ethereums, which is designed to be controlled by no one. Since companies operate under the tutelage of governments, there is an obvious dissonance between them and staking. This might not be a problem if the companies accounted for an insignificant amount of total staking activity, but only Coinbase and Kraken, both US-domiciled, account for around 20% of total ETH staked.

It would be great if all government-regulated companies accounted for considerably less than 10% of Ethereums’ staking, or any public blockchain for that matter. Perhaps the quickest way to get this change is to disallow staking! After Mr. Armstrong’s tweets, token prices from decentralized staking projects rose. Hopefully this will result in an increase in their betting percentages. There was another bump on Kraken’s announcement. If the SEC continues, expect to see a significant shift from centralized to decentralized staking.

This is part of a larger trend that the crypto industry started last year. When opaque crypto business after business went insolvent like falling dominoes, people started looking for viable on-chain alternatives. Suddenly the quaint values ​​that defined early crypto users weren’t so quaint anymore, for example, not your keys, not your coins, or don’t trust, verify.

Related: Digital Currency Pools Genesis Implosion: What Happens Next?

People started looking for trustless platforms for things like derivatives and yield. We can probably add staking to the list too. Fortunately, on-chain technology is now mature enough to provide a comparable experience to centralized services. This experience will only get better as technology continues to develop rapidly and more people move their assets on-chain.

On-ramp Fiat exchanges like Coinbase will always play an important role in crypto, but it’s clear that eventually every crypto-to-crypto service these intermediaries currently offer will be retired in favor of superior fully decentralized alternatives.

To the skeptics who say crypto is dead.

Simply answer, yes, crypto is dead. Long live cryptography.

Dennis Jarvis is the CEO of Bitcoin.com. He previously held various management and product management positions at Apple, Rakuten, and distributed ledger startup Orb. He earned a bachelor’s degree in economics from Temple University and is an outdoor enthusiast and ski instructor.

This article is for general informational purposes and is not intended to be and should not be considered legal or investment advice. The views, thoughts and opinions expressed herein are the sole authors and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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