Powell explained Kraken’s decision not to fight the SEC and voiced optimism for the future.
Jesse Powell, Kraken’s co-founder and former CEO, remarked on his company’s decision to discontinue US staking services in a series of tweets on Feb. 9.
Kraken struck a deal with the Securities and Exchange Commission yesterday, forcing it to pay $30 million and cease staking services for US clients. Kraken’s staking services were purportedly a securities offering.
Powell addressed the incident in person today. He stated:
“I honestly hope that somebody proves, in court, that there is a legal, user-friendly version of custodial staking that can be offered to US consumers…It’ll be a brutal, lengthy, expensive fight … but the industry and the USA will be extremely grateful.”
Powell indicated that Kraken did not fight the SEC because the “risk-adjusted return” was not worth the legal fees.
Although other firms may have the means to defend themselves, he claims that the SEC targeted Kraken during a bear market and waited for it to lay off 30% of its employees. “They have all of our financials and a lot of leverage,” Powell explained. “Perhaps we appeared frail.”
Powell made the remarks in defense of Paul Grewal, the chief legal officer of Coinbase, a competitor exchange. Grewal is presently attempting to explain how Coinbase’s staking service differs from Kraken’s, probably in order to avoid SEC action.
Powell also responded to SEC commissioner Hester Peirce, who blasted her agency yesterday for failing to outline a compliance roadmap for Kraken and other cryptocurrency firms.
He expressed his need for “direction,” writing:
“The ‘This is wrong but I won’t tell you how to do it right. Want to find out if X works? Try it and see what happens.’ approach does not help the industry nor consumers. We aren’t anti-regulation but we need a clear path to operate.”
Powell agreed with statements from Congress member Tom Emmer, a noted pro-crypto legislator who advocated against the SEC’s “purgatory strategy”. Powell wrote:
“Congress must act to protect the domestic crypto industry and US consumers who will now be going offshore to obtain services no longer available in the US.”
Emmer, too, worried of staking-related possibilities shifting overseas.
Powell bemoaned the demise of Kraken’s staking service, but he pointed out that users may partake in decentralized staking on Ethereum. He stated that he “strongly recommend[s]” this if one had the necessary technical skills and minimal holdings (32 ETH).
Powell has called for a different staking strategy in response to NuCypher CEO MacLane Wilkison’s statement. Powell referred to demurrage-based staking as “the best model” at the time. Unstaked tokens are sliced or burnt in this method, however staked tokens retain their usual value. Because this method does not need the distribution of incentives, regulators are unlikely to take action against it.
Jesse Powell’s words hold weight because of his position as Kraken’s commander. Though he indicated last year that he would step down as CEO, his Twitter bio indicates that he is still in the position today, and he is the company’s most visible leader.
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