SEC crackdown on crypto staking in the US could boost decentralization
The Ethereum network underwent the successful Shapella hard fork on April 12, allowing validators to withdraw their long-staked Ether (ETH) from the Beacon Chain after three years. In the first week of withdrawals, more than a million ETH was unstaked by validators.
However, from the second week onward, the number of ETH staked was higher than that of ETH withdrawn, indicating that validators are re-staking most of their ETH back into mining pools.
Staking is temporarily locking tokens on a network that uses a proof-of-stake (PoS) consensus mechanism. In a PoS network like Ethereum, users who wish to support the blockchain by validating new transactions and adding new blocks must “stake” a certain amount of cryptocurrency. In return, they receive rewards.
Staking ensures that a blockchain is only updated with valid data and transactions. Participants wanting to increase their chances of validating new transactions offer to stake large amounts of cryptocurrency as insurance.
Ether being re-staked is a big positive for the Ethereum network, but its future in the United States remains uncertain. Ethereum staking is getting tricky for many U.S.-based validators as staking service providers, particularly centralized exchanges, are fighting a regulatory battle with the Securities and Exchange Commission (SEC).
In February, Kraken crypto exchange settled with the SEC for $30 million and closed its staking services for U.S clients. The SEC claimed that the service qualified as a security and that Kraken must obtain the necessary license to operate.
Today we charged Kraken with failing to register the offer and sale of their crypto asset staking-as-a-service program, whereby investors transfer crypto assets to Kraken for staking in
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