Ether losses build as crypto investors weigh the future of staking after Kraken exchange's SEC settlement

The price of ether fell on Friday, extending losses from the previous session as fears about a U.S. regulatory crackdown on crypto staking weighed on investors.

Ether led cryptocurrency declines, with the price falling more than 2% Friday morning to $1,543.08, according to Coin Metrics, after falling 5% the previous day. Earlier in the day it fell to its lowest level since Jan. 25. Bitcoin's loss was slightly smaller. It was last down by less than 1% at $21,829.97, but is still trading at its lowest levels since the late January.

Ether falls amid crypto's latest regulation scare

The drop began after crypto exchange Kraken closed its staking program as part of a $30 million settlement with the Securities and Exchange Commission. Earlier in the week, Coinbase CEO Brian Armstrong sounded the alarm on a potential regulatory crackdown on staking and staking services in the U.S. that may be underway.

"Kraken's move certainly casts a gloomy outlook for many crypto exchanges that offer staking as a service, but effects on PoW cryptos, such as bitcoin and litecoin, should not be as severe as effects on PoS cryptos going forward," said Yuya Hasegawa, crypto market analyst at Japanese bitcoin exchange Bitbank.

The angst in the crypto market centers on the staking services offered by exchanges like Kraken as well as Coinbase. Staking is when investors lock up their cryptocurrency for a period of time to earn interest on it and to earn a position as a network validator, meaning they have the ability to verify and process transactions.

Staking is available only on networks like Ethereum that operate using the "proof-of-stake" protocol. Bitcoin runs using the "proof-of-work" to confirm transactions.