Kraken co-founder and current CEO Jesse Powell commented on his company’s decision to shut down its US staking service in a series of tweets on February 9.
Kraken leader comments on settlement
Yesterday, Kraken reached a settlement with the U.S. Securities and Exchange Commission, forcing it to pay $30 million and cease staking services to U.S. customers. Kraken’s staking service allegedly constituted a securities offering.
Powell personally commented those events today. he wrote:
“I honestly hope that someone will prove in court that there is a legal and user-friendly version of custodial staking that we can offer US consumers…It will be a brutal, long and costly battle…but the industry and the United States will be very grateful.”
Powell explained that Kraken didn’t fight the SEC because of its “risk-adjusted return,” suggesting the unlikely victory wasn’t worth the legal costs.
Other companies may have the resources to defend themselves, he said, but the SEC targeted Kraken during the bear market, waiting to lay off 30% of its workforce. . “They have all our finances, a lot of leverage,” Powell said. “Maybe we looked weak.“
Powell made these comments in support of Paul Grewal, chief legal officer of rival exchange Coinbase. Grewal is now trying to explain how Coinbase’s staking service differs from Kraken’s staking service.
Powell responds to officials and lawmakers
Powell also responded yesterday to SEC Commissioner Hester Peirce, who criticized her agency for not setting out a compliance path for Kraken and other cryptocurrency companies.
“Guidance would be appreciated,” he said. write in:
“This is wrong, but I won’t tell you how to do it right. Want to know if X works? Try it out and see what happens. We are not against regulation, but we need a clear course to operate.”
Powell echoed a statement by prominent cryptocurrency congressman Tom Emmer, who argued against the SEC’s “clean-up strategy.”Powell I have written:
“Congress must act to protect the domestic crypto industry and US consumers who go offshore to obtain services that are no longer available in the US.”
Emer similarly cautioned against moving staking-related opportunities offshore.
Powell advocates decentralized staking
Powell lamented the cancellation of Kraken’s staking service, but said users can participate in decentralized staking on Ethereum. he said:[s]This is if you have the technical ability and the required minimum holding amount (32 ETH).
Powell also advocated an alternative staking model in response to comments from NuCypher CEO MacLane Wilkison. So Powell called demurrage-based staking a “good model.” In this approach, unstaked tokens are slashed or burned, while staked tokens maintain their normal value. Since this system does not require the distribution of rewards, it will probably be difficult for regulators to take action against it.
Jesse Powell’s comments are important because of his leadership position at Kraken. He announced he was stepping down as CEO last year, but according to his Twitter bio, he is still in the role and remains the company’s most visible executive.