Garlinghouse highlights progress in crypto rule-making efforts abroad in the face of continued regulatory pushback in the U.S.
Ripple Chief Executive Officer Brad Garlinghouse has opted to show that crypto regulatory efforts are progressing quite positively abroad, despite regulatory pushback in the United States.
Garlinghouse, in a Twitter thread yesterday, described these efforts toward crypto regulatory clarity as “energizing.”
“Stepping back for a moment from what’s happening in the US – just in the last few weeks, the number of positive (or at least headed in the direction of CLARITY) global regulatory developments is energizing!” Garlinhouse wrote in the leading tweet.
Stepping back for a moment from what’s happening in the US – just in the last few weeks, the number of positive (or at least headed in the direction of CLARITY) global regulatory developments is energizing!
— Brad Garlinghouse (@bgarlinghouse) February 9, 2023
The Ripple executive tapped the United Arab Emirates, Australia, the United Kingdom, South Korea, and Brazil as regions that are taking steps to attract crypto firms, encourage innovation and protect users with clear rules.
While the CEO’s intent might be to raise the sunken heads of crypto community members in the face of U.S. regulatory resistance, it also paints the stark reality of how global economies are beginning to leave the U.S. behind in innovation.
A polarized legislative arm and regulatory bodies bent on exercising control over the nascent market without going through the rigors of creating clear rules have ensured that crypto development in the U.S. remains uncertain at best.
Garlinghouse’s latest statements come as the U.S. Securities and Exchange Commission, with its latest enforcement action against Kraken, makes it clear that it wants platforms offering staking-as-a-service to U.S.-based customers to register as engaging in a security offering. Notably, it charged the crypto exchange for selling unregistered security via its staking platform, validating a recent Bloomberg report.
“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,” SEC Chair Gary Gensler said in the agency’s press release.
Director of the SEC’s Division of Enforcement Gurbir S. Grewal asserted that platforms like Kraken offering this service put investors at risk by failing to provide the level of disclosure required by law. Grewal lauded the SEC’s enforcement action as a step toward protecting investors, asserting that Kraken offered users unrealistic returns retaining the right to pay out nothing while giving no insight into its operation and financial health.
Notably, the long-standing U.S.-based crypto exchange has opted to settle the charges confirming recent speculations, paying a $30 million fine and shutting down its staking service for U.S. customers.
Consequently, it will automatically unstake all crypto assets belonging to U.S. customers aside from ETH, which will wait till the Shanghai upgrade, per a blog post yesterday. Meanwhile, staking services will continue uninterrupted for non-U.S. clients under a separate subsidiary.
For context, staking is the process by which blockchain participants lock up crypto assets as collateral to guarantee honesty in validating transactions on a proof-of-stake blockchain. Notably, honest validators are rewarded with new tokens, while dishonest validators risk losing their tokens. Consequently, it ensures network security.
Crypto holders lacking the necessary equipment or technical know-how to run a node often pledge their assets to service providers like Kraken to earn a share of the rewards.
Per the SEC complaint, Kraken has earned over $45 million from assets staked by U.S. customers, asserting that the service had about 135,000 U.S. participants by June 2022. Notably, it offered users a 20% yield per its website.