Cryptos and Bitcoin plummet after SEC ruling against Kraken

Cryptocurrencies are plummeting on Friday. Bitcoin (BTC) has fallen 3.4% in the last 24 hours and lost $22,000, while Ethereum´s (ETH) drop is sharper: it has retreated 4.9% and is down to $1,550. In the last five days, the two main 'tokens' of the market have fallen more than 6% and 5%, respectively.

Not many days ago the market was marveling at the spectacular rebound that 'cryptos' staged in January. Investors were eagerly awaiting the moment when Bitcoin would surpass $24,000, but the latest macroeconomic data sent the reigning cryptocurrency reeling. With an eye on next week's inflation data offering peace of mind, cryptos received an unexpected blow on Thursday night that has caused them to collapse: the sanction of the Securities and Exchange Commission (SEC) against the Kraken exchange.

The Californian platform reached an agreement with the Californian regulator to stop offering staking services to its clients and agreed to pay a fine of $30 million in restitution, late payment interest and civil penalties. The SEC accused Kraken of "failing to register the offer and sale of its cryptoasset wagering-as-a-service program" since 2019, which the Commission characterized as a sale of securities and therefore fall under its regulatory umbrella.

"Kraken not only offered investors outsized returns untethered to any economic realities, but also retained the right to pay them no returns at all. All the while, it provided them zero insight into, among other things, its financial condition and whether it even had the means of paying the marketed returns in the first place," stressed Gurbir S. Grewal, director of the SEC's division of regulatory compliance.

The Commission also alleged that Kraken users effectively lost control of their 'tokens' by offering them to the 'staking' program, which put them at additional risk and "very little protection." "Today’s action should make clear to the marketplace that staking-as-a-service providers must register and provide full, fair and truthful disclosure and investor protection," stated Gary Gensler, chairman of the SEC.

It should be noted that, recently, Coinbase CEO Brian Armstrong assessed rumors that the regulator would be considering banning crypto staking, which would significantly harm his exchange as it offers this type of services. "I hope this is not the case. It would be a terrible path for the United States if that happens," commented Armstrong. It is also worth remembering that an estimated 16 million ETH tokens could be released into the market once the Shanghai upgrade is completed next March, which could lead to strong selling pressure as well as a staking rally from which Coinbase could benefit.

For its part, Kraken indicated in a company blog post that it would continue to offer betting services to non-U.S. customers through a subsidiary. All in all, the SEC ruling categorically and permanently prohibits the option to offer betting services to U.S. residents.

Meanwhile, numerous financial sources have revealed to 'Cointelegraph' that numerous U.S. banks are coming under pressure from the Federal Reserve (Fed) and the Federal Deposit Insurance Corporation (FDIC) to cut ties with companies in the cryptoasset sphere.

"Innovation has outpaced the legislation that our government has put forward. We need some blood, some sign of trust that our government is going to back us and that there isn't just going to be the Wild West out there with a bunch of criminals in the industry, because it ultimately hurts the common person," Brett Sifling, investment advisor at Gerber Kawasaki, indicated in an interview with 'CoinDesk TV'.

In other market news, there have been widespread declines. Ripple (XRP) has dropped 2%, Binance coin (BNB) and Polygon (MATIC) have fallen 4.8% and Cardano (ADA), whose blockhain will receive a major upgrade next week, Dogecoin (DOGE) and Solana (SOL) have plummeted over 6%.