The evolution of Kraken staking

The SEC forced Kraken to discontinue its US-based staking-as-a-service program following a $30 million settlement in February 2023. This legal action followed allegations that the exchange operated as an unregistered securities exchange, broker, dealer, and clearing agency since 2018. Kraken offered these staking services to clients starting in 2019. The agency argued that the firm made nine-figure profits by facilitating the trading of unregistered crypto asset securities. The SEC also found that Kraken used accounts holding customer assets to handle operational expenses. Gary Gensler, the former SEC chair, stated that crypto intermediaries must provide proper disclosures and safeguards when they offer investment contracts in exchange for tokens. Jesse Powell, the founder, described the regulator’s actions as an attempt to destroy capital and deter crypto adoption. The SEC accused Kraken of unlawfully facilitating the trading of crypto asset securities and making nine-figure profits while it operated as an unregistered securities exchange, broker, dealer, and clearing agency since 2018.

Kraken relaunched its staking services for US clients in 37 states in 2026. This product includes 17 different digital assets, such as Ethereum and Solana. The company provides two distinct paths: Flexible Staking and Bonded Staking. Flexible Staking has a 30% commission on rewards and allows for instant withdrawals. Bonded Staking follows the protocol unbonding period, which can last three or more days. The commission for Bonded Staking depends on the total eligible assets under management, with tiers at 25%, 20%, 10%, 5%, or 0%. For certain assets like Tezos, users can earn 12-16% APR with 4-day Bonded terms.

I find the variable commission for Bonded Staking more competitive than the 35% commission that Coinbase charges. Coinbase One members pay lower rates of 25.25%, 28.5%, or 31.75% depending on the asset.

Kraken DeFi Earn provides a non-custodial alternative through an embedded wallet. Users control their private keys via Privy infrastructure. This product allows users to supply assets to protocols like Aave or Tydro to earn interest from borrowers. You should consider this model if you want to maintain control over your assets without the risks of a centralized custodian. This non-custodial approach differs from the liquid staking model used by Lido. In the Lido model, users deposit ETH and receive stETH, which is a receipt token. Lido charges a 10% protocol fee on staking rewards. Rocket Pool also provides liquid staking, but it charges a 14% node operator commission. The technical complexity of the Lido model is moderate because it requires a wallet and on-chain transactions. In contrast, the DeFi Earn model has low technical complexity because it uses no seed phrases.

Jesse Powell stepped down as CEO to serve as the company chairman. Dave Ripley now leads Kraken as the new CEO. Powell founded the exchange in 2011, although it did not launch until 2013. Kraken’s market share among the top 15 cryptocurrency exchanges dropped by almost one-third this year. The company’s 24-hour trading volume remains at almost $675 million. The regulatory landscape changed when the new administration appointed Mark Uyeda to lead the SEC. Will the new leadership maintain the libertarian values Powell established? Kraken remains a major player in the industry despite these shifts.