US SEC Crypto Staking Crackdown Benefits Decentralized Services, Here’s How

According to Bloomberg, decentralized financial protocols such as Lido, Rocket Pool, and StakeWise may benefit from the Securities and Exchange Commission's (SEC) crackdown on crypto staking services.

However, the decentralized staking mechanism will profit only if the SEC or other regulators do not take comparable regulatory action in the future.

How Crypto Staking Crackdown To Help Decentralized Services

Kraken, a U.S.-based cryptocurrency exchange, settled SEC claims of unregistered offer and sale of securities through its staking-as-a-service program on Thursday. The cryptocurrency exchange paid $30 million and agreed to halt service in the United States.

Many in the DeFi community feel that the autonomous feature is what caused decentralized finance (DeFi) apps to fall outside of regulators' guidelines because “no individual profits directly.” People utilize these DeFi apps to trade, lend, and borrow without the necessity of intermediaries by utilizing automated protocols.

Wave Financial's head of decentralized finance, Henry Elder, stated:

“This is a tremendous boon for decentralized staking platforms like as Lido, Rocket Pool, and StakeWise. Their competitive advantage is an inbuilt resistance to regulatory intervention, which would have been insignificant in the absence of such action.”

Earning rewards and yields through staking requires locking up crypto tokens on the protocol that helps organize transactions on multiple blockchains such as Ethereum. To improve their revenue, cryptocurrency exchanges such as Coinbase, Kraken, and Binance have launched staking services.

Austin Campbell, an adjunct professor at Columbia Business School, believes that the crypto staking crackdown will benefit on-chain direct staking and decentralized platforms in the medium run. However, it is too early for DeFi to declare victory. Similar to what is happening with crypto exchanges, regulators are more likely to interfere and require platforms to register with them.

As a reminder, WikiBit is ready to help you search the qualifications and reputation of projects in a bid to protect you from hidden dangers in this risky industry!