Regulation comes for crypto staking: Law Decoded, Feb. 6–13
Last week, the United States Securities and Exchange Commission (SEC) reached an agreement with cryptocurrency exchange Kraken. The latter will stop offering crypto staking services to American customers and pay $30 million in disgorgement, prejudgment interest and civil penalties.
While the sum of fines could hardly get an entity like Kraken off balance, the future of staking concerns the crypto market. The court agreement attracted the ire of not only the general crypto community but of investors, politicians and industry executives, with Cinneamhain Ventures partner Adam Cochran calling SEC Chair Gary Gensler “an agent of an anti-crypto agenda” rather than a regulator. The CEO of the Blockchain Association, Kristin Smith, urged Congress to take such important cases under its direct control.
The CEO and co-founder of cryptocurrency exchange Coinbase, Brian Armstrong, believes that banning retail crypto staking in the United States would be a “terrible” move by the country’s regulators. Armstrong also criticized the current lack of regulatory clarity in the U.S. and subsequent “regulation by enforcement” that he says is driving companies offshore, such as FTX.
Even the SEC Commissioner Hester Peirce has publicly rebuked her agency over the shutdown of Kraken’s crypto staking program. The commissioner blasted her agency, arguing that regulation by enforcement “is not an efficient or fair way of regulating” an emerging industry. Peirce implied the regulator was “lazy and paternalistic,” suggesting the SEC should have initiated a “public process to develop a workable registration process that provides valuable information to investors.”
South Korean regulator provides guidance on security tokens
South Korea established guidance that specifies which digital assets will be considered and regulated as securities in the country. The law considers securities as financial investments where investors are not required to make additional payments after their original investment. The Financial Services Commission (FSC) also provided examples of which digital assets will most likely be classified as securities. According to the FSC, this may include tokens that provide a stake in business operations, gives holders rights to dividends or residual assets, or provide profit to the investors.
Dubai releases crypto regulations for virtual asset service providers
The Virtual Asset Regulatory Authority (VARA), the regulator in charge of overseeing cryptocurrency laws within Dubai, has issued new guidelines for virtual asset service providers (VASPs) operating within the emirate. All market participants, whether licensed by VARA or not, must adhere to marketing, advertising and promotions regulations. Violators will be fined between $5,500 (20,000 dirhams) and $55,000 (200,000 dirhams), and repeat offenders could see fines as high as $135,000 (500,000 dirhams). However, the rules only apply to market participants within Dubai, excluding those operating under the Dubai International Financial Centre.
Interpol wants to police metaverse crimes
The International Criminal Police Organization, or Interpol, is investigating how it could police crimes in the metaverse. According to Interpol secretary general Jurgen Stock, as the number of metaverse users grows and the technology further develops, the list of possible crimes will only expand to potentially include crimes against children, data theft, money laundering, financial fraud, counterfeiting, ransomware, phishing, and sexual assault and harassment. The move to police the metaverse comes nearly four months after Interpol launched its own metaverse in October 2022 at the 90th Interpol General Assembly in New Delhi, India.