Coinbase CEO Armstrong decries rumors of possible US SEC ban on crypto staking

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Brian Armstrong, the CEO of Coinbase Global Inc., intensified his verbal battle with the US Securities and Exchange Commission by warning that he had heard rumours that the organisation wanted to “get rid” of retail investors’ staking of cryptocurrencies.
He asserted that the process of staking is “a tremendously important innovation” and tweeted, “I hope that’s not the case as I believe it would be a bad route for the U.S. if that was allowed to happen.”
The SEC chose not to respond to any of Armstrong’s tweets. The majority of digital tokens are securities, according to the agency, and as such should be governed by its regulations. Gary Gensler, the chair, has previously suggested that staking may fall under the regulator’s jurisdiction. Staking, according to Armstrong, is not a security.
Staking entails receiving compensation in exchange for securing coins to maintain transactional order on various blockchains, including Ethereum. To diversify their revenue streams, crypto exchanges like Coinbase, Kraken, and others have entered the staking market.

The businesses allow users to stake currencies and receive a portion of the returns without the requirement for specialised computer equipment or a minimum of 32 Ether. Ethereum stakes have yields of roughly 6%. Shareholders have been informed of Coinbase’s staking service development.
Coinbase said in August of last year that the SEC was looking into its staking operations. According to tracker Etherscan, the exchange is the second-largest depositor of staked Ether.
Armstrong and the SEC have had previous disagreements, like as when the platform had to discontinue a cryptocurrency loan product as a result of pressure from the regulator.

Since Ethereum, the largest commercial cryptocurrency highway, shifted to the so-called proof-of-stake method of allocating blockchain transactions in September of last year, staking services have gained popularity.

Holders of Ethereum will be able to withdraw their staked coins in the upcoming Shanghai iteration of the cryptocurrency, which is scheduled to launch in March.

Bitcoin employs a different type of computational method called proof-of-work, which is widely criticised for consuming excessive amounts of energy.

According to a report from Staked and Kraken, proof-of-stake blockchains represented 23% of the total market value of digital assets at the end of 2022. According to the research, staked assets are worth $42 billion.

Investors may switch to decentralised staking services like Lido and Rocket Pool in response to an SEC crackdown rather than centralised exchanges like Coinbase, which may be more difficult for regulators to monitor.

Armstrong’s tweets sparked a rally for Lido’s LDO token and Rocket Pool’s RPL, which are now up roughly 5% and 10%, respectively, during the previous 24 hours, according to statistics from CoinGecko. Even so, Thursday’s broader cryptocurrency markets sagged, with Bitcoin falling by as much as 2.5%.

The collapse of rival FTX and a slump in digital assets last year severely hurt Coinbase. In 2022, shares of Coinbase fell by roughly 86%. By nearly doubling thus far in 2023 along with a recovery in cryptoassets, they have partially offset those losses.