Benzinga - Leading cryptocurrency exchange Kraken has agreed to discontinue its staking operations as part of a settlement with the U.S. Securities and Exchange Commission (SEC), Coindesk reported on Thursday, citing a source familiar with the matter.
The settlement was reportedly approved during a private meeting of the SEC's Commissioners on Thursday, with a public announcement to follow.
The decision to discontinue staking services for U.S. customers was later confirmed by the SEC.
Kraken offered a range of staking services, including a crypto-lending product that promised yields of up to 24%.
According to the source, these services are also expected to be shut down as part of the settlement.
On its website, Kraken's staking service advertised a 20% annual percentage yield, with staking rewards to be paid to customers twice a week.
Benzinga on Wednesday reported Kraken was close to reaching a settlement with the SEC regarding the offering of unregistered securities.
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This news came a day after Coinbase CEO Brian Armstrong tweeted about rumors that the SEC was planning to prevent retail customers from participating in staking, a process where individuals hold crypto tokens to support the functioning of blockchains such as Ethereum (CRYPTO: ETH).
SEC Chair Gary Gensler has previously stated his belief that staking through intermediaries, such as Kraken, may fall under the definition of securities according to the Howey Test, a decades-old Supreme Court case used to determine if something is a security under U.S. law.
Gensler compared staking to lending and noted the SEC has previously brought charges against and settled with lending companies, including the now-bankrupt BlockFi.
According to Dune Analytics, the majority of individuals staking on Ethereum use intermediaries such as Kraken.
Following the news of the settlement, the cryptocurrency market experienced a dip, with Ethereum falling by 4.5% within 30 minutes.
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