With the long-awaited Shapella upgrade just around the corner, crypto exchange Kraken is preparing to withdraw all staked ETH on behalf of its clients as soon as possible after the update rolls out.
The event will bring Kraken’s staking as a service product to a complete close, after being forced by regulators into shuttering the program in February.
Kraken Withdraws its Stake
The upgrade, scheduled for block 6209536 at 10:27:35 PM UTC on April 12, will let Ethereum stakers finally withdraw their ETH from the network’s staking contract for the first time since December 2020. There are currently over 18 million ETH locked in the contract, of which over 1,247,000 belong to Kraken, according to Glassnode data.
Popular Ethereum educator sassal.eth on Twitter said that Kraken’s staking withdrawals have already begun ahead of the upgrade and that other validators are capable of withdrawals as well. However, the exchange won’t be able to withdraw its initial 32 ETH deposit required for staking, nor its associated rewards, until after Shapella takes place.
Some investors have feared that the unlocking withdrawals could trigger a massive amount of ETH onto the market, potentially crushing its price. However, data from IntoTheBlock suggests that a tiny fraction of validators have chosen to withdraw their stake so far.
“What Kraken is doing right now is exiting their validators,” he said. “They are doing this because of the SEC action brought against Kraken’s Ethereum staking product back in February.”
SEC VS Staking
Two months ago, the Securities and Exchange Commission (SEC) fined Kraken $30 million for failing to register its staking product as a security. While the enforcement action was not short of criticism from industry leaders and crypto-supportive politicians, other exchanges like Coinbase are prepared to be sued for offering a similar product.
Staking as a service lets retail customers conveniently access staking rewards without any technical know-how, and without needing to cross the 32 ETH threshold for running a personal validator. SEC chairman Gary Gensler has warned that such services, as well as proof of stake cryptocurrencies more broadly, may qualify as securities under the Howey Test.