Coinbase CEO Brian Armstrong is sending strong warning signs to other major players in the crypto industry: beware, the SEC is coming for companies who practice staking.
This seems to be a fear that is echoing all throughout the crypto sphere ever since it was announced that the SEC would be charging Kraken with a $30 million fine and ending staking for the embattled crypto exchange.
What about Coinbase, however? The strongest and most relied upon American corporation that has followed the laws and everything the SEC has thrown at them.
Will It Be Business as Usual for Coinbase?
CEO Brian Armstrong doesn’t seem to believe that the crypto slaughter from the SEC is over, and he thinks that this witch hunt could spread all throughout the crypto industry, regardless of country of origin or how well everyone seems to be following the rules. And so, we must ask, is this the beginning or the end?
Let’s back up a bit. Coinbase offers its users staking facilities for some of the top cryptocurrencies, such as Ethereum. They essentially simplify the entire staking process, and they make it extremely simple so that retail players, too, can benefit from it. Crypto staking involves the process of earning rewards by locking up coins that help facilitate transactions on different blockchain platforms, such as Ethereum.
As a result, crypto exchanges like Coinbase and Kraken have started offering the staking facility to diversify revenues.
Armstrong is Quick to Defend Staking
This is not the first time that the Coinbase CEO has lashed out at the securities regulator. In August 2022, Brian Armstrong warned that the exchange would be shutting down the Ethereum staking facility if threatened by the regulators like the SEC. Also, in his latest tweet thread, the Coinbase CEO noted that if the SEC proceeds with banning crypto staking, it would be a “terrible path” for the U.S. He further added:
“Staking is a really important innovation in crypto. 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.”
As per the data on Etherscan, Coinbase is currently the second-largest depositor of staked Ether. For anyone to participate in Ethereum staking, they must deposit a total of 32 ETH and take a cut in the rewards. By staking their ETH, users can earn yields up to 6%.
Over the last year and so, Coinbase has locked horns with the U.S. SEC over multiple issues. Due to pressure from the securities agency, Coinbase had to withdraw its crypto-lending product.
Ever since the Ethereum blockchain switched to the Proof-of-Stake network last September 2022, the demand for staking services has been on the rise. The rumor that the SEC could be putting an end to this has certainly spooked the crypto community. The Coinbase CEO added that regulation by enforcement is not the right approach. It would rather encourage companies to set up bases outside the United States. Brian Armstrong added:
“We need to make sure that new technologies are encouraged to grow in the US and not stifled by lack of clear rules. When it comes to financial services and web3, it’s a matter of national security that these capabilities be built out in the U.S.”
What Does the Future Hold for Staking?
The next phase of Ethereum development involves a Shanghai hard fork scheduled ahead in March 2023. It is important from the viewpoint that it would allow ETH holders to withdraw their staked coins.
Any action of the SEC banning crypto staking could drive away investors from centralized exchanges like Coinbase to other decentralized staking pools.
And ultimately, what good does any of this do for anyone other than the SEC and other federal regulators? Neither criminals nor thieves would be paying. It would be the hardworking retail investor.