Cryptocurrency exchange Kraken agreed to a settlement with the Securities and Exchange Commission on Thursday to shut down its crypto asset staking programs and pay a $30 million fine.

The SEC said that Kraken had been providing its staking-as-a-service without registering it with the regulator, which had been running since 2019. According to the complaint, investors had more than $2.7 billion worth of cryptocurrency investing in the platform and Kraken had earned about $147 million in net revenue.

Staking is a process by which cryptocurrency token holders can earn rewards by locking up their crypto assets for a set period of time to support the operation of a blockchain. In return for staking their crypto, holders earn more cryptocurrency. Kraken’s program offers users up to 20% annual rewards returns on staked investments in certain currencies, according to the company’s website.

The SEC also claimed that when users stake their crypto tokens they take on additional risks associated with locking their crypto on other platforms. The regulator said that clients “lose control of their tokens” and this “affords very little protection.”

“Whether it’s through staking-as-a-service, lending, or other means, crypto intermediaries, when offering investment contracts in exchange for investors’ tokens, need to provide the proper disclosures and safeguards required by our securities laws,” said SEC Chair Gary Gensler.

As part of the settlement, Kraken subsidiaries Payward Ventures Inc. and Payward Trading Ltd., which make up the company, will end staking services for U.S. customers.

Kraken said in a blog post that the company would automatically unstake all affected client assets enrolled in the program and those assets will no longer earn staking rewards. That applies to all assets except for staked Ether, which cannot be unstaked until after the upcoming Shanghai upgrade to the Ethereum blockchain.

Kraken’s non-U.S. clients will retain access to the staking-as-a-service program through a separate Kraken subsidiary and receive rewards, stake and unstake assets as normal.

The exchange Coinbase Inc. is another example of a company that offers crypto staking services to customers, which itself has come under scrutiny by the SEC for its operations. The company currently offers its own similar program, which advertises up to 6% annual returns.

Preceding the announcement of the SEC settlement, Coinbase Chief Executive Brain Armstrong said on Twitter that the regulator was rumored to “get rid of staking for U.S. retail customers.” He added that this would be a “terrible path” if it were permitted to happen.

“Staking is a really important innovation in crypto,” he wrote. “It allows users to participate directly in running open crypto networks. Staking brings many positive improvements to the space, including scalability, increased security, and reduced carbon footprints.”

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