Cryptocurrencies Fall Amid Concern Over Regulatory Crackdown

The decline in cryptocurrencies gained momentum Thursday as signs of a regulatory crackdown on the industry and a broader pullback from risk assets weighed on investor sentiment.

Bitcoin, the largest digital coin by market value, fell as much as 4.9%, its worst performance since the end of January, data compiled by Bloomberg show. The token traded around $21,900 as of 3:30 p.m. in New York, after hovering above $23,000 earlier this week. Others also lost ground, with Ether dropping more than 5%. Dogecoin and Avalanche, meanwhile, each fell more than 8%.

The drops followed news that exchange Kraken will pay $30 million to settle Securities and Exchange Commission allegations that it broke US securities rules with its crypto-asset staking products and will discontinue them as part of the settlement.

“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 a statement.

Meanwhile, Coinbase Global Inc.’s head Brian Armstrong escalated his war of words with the SEC, warning yesterday that he’d heard rumors the agency wants to “get rid of” crypto staking by retail investors.

Proof-of-stake — a process of using stashes of coins to order transactions — is used on a multitude of blockchains, including Ethereum. At the end of last year, the value of staked coins totaled $42 billion, according to Kraken and Staked’s quarterly report. Blockchains that use staking add up to 23% of crypto’s total market cap, according to the report.