The SEC’s direct action sent shockwaves in the cryptocurrency market when it accused the California-based Kraken crypto exchange of offering an unregistered cryptocurrency staking program, violating U.S. securities law. This has caused a decline in the crypto market with Bitcoin dropping by 4% and Ethereum falling by over 5%.
The proof-of-stake method is used to order transactions on several blockchains, including Ethereum, by using collections of cryptocurrencies. The value of staked coins reached $42 billion at the end of last year, with 23% of the market capitalization of all cryptocurrencies held by blockchains that use staking.
The decline in the crypto market has led to a growing fear for DeFi, as staking is a vital by-product of the larger DeFi ecosystem. The decline in cryptocurrency prices is expected to continue in the near future, with DEFI-specific tokens predicted to be hit the hardest.
U.S. stocks also traded lower on Thursday, with the S&P 500 index on track for its third decline out of four sessions this week. The decline in the stock market adds to the already looming fear for the future of cryptocurrency and DeFi.
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