CEO and co-founder of cryptocurrency exchange Coinbase Brian Armstrong believes that banning retail crypto staking in the United States would be a “terrible” move by regulators in the country.
amstrong do comments in a Feb. 9 Twitter thread that has already been viewed more than 2.2 million times, after noting that they had heard “rumors” that the U.S. Securities and Exchange Commission “wants to get rid of crypto staking” for retail customers.
“I hope it’s not, because I think it would be a terrible path for the United States if it were allowed.”
Armstrong didn’t share the origin of the rumors, but went on to note that staking was “a really significant innovation in crypto.”
“Staking brings many positive improvements to the space, including scalability, increased security, and a reduced carbon footprint,” he added.
2/ 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 a reduced carbon footprint.
—Brian Armstrong (@brian_armstrong) February 8, 2023
armstrong too reference an October 5 blog post from crypto investment firm Paradigm, which argued that Ethereum’s transition to proof-of-stake and its subsequent “staking” model does not make it a security.
Paradigm’s publication came just weeks after SEC Chairman Gary Gensler suggested that proof-of-stake (PoS) cryptocurrencies could trigger securities laws on September 15, 2022, while s speaking to reporters after a meeting of the Senate Banking Committee.
Armstrong also lambasted the current lack of regulatory clarity in the United States and the “regulation by app” that he said pushes companies overseas, such as crypto exchange FTX.
He reiterated his calls for regulation that provides clear rules for industry while safeguarding innovation.
Related: Crypto exchange Kraken faces investigation over possible securities violations: report
According to Staking Rewards, the top four staked cryptocurrencies by market capitalization account for over $55 billion in staked assets, suggesting that a nationwide ban would be a major blow to the crypto industry. country, which has already seen an exodus of crypto-related businesses.
Some industry commentators have suggested that the SEC could go after centralized parties that offer staking services rather than the technology itself, believing that the latter would be a losing battle that would “crush them into previous”.
PS – If the SEC is coming for staking, I’m more than happy to help support any law firms that want to take on this fight with research, analysis, or technical knowledge.
If they want to cross the line, it’s time to take them to court and end enforcement.
— Adam Cochran (adamscochran.eth) (@adamscochran) February 9, 2023
General counsel for Delphi Digital’s research and development arm, Gabriel Shapiro, suggested there is a strong argument that staking services provided by centralized exchanges like Coinbase constitute security, drawing parallels between them and other “Earn” products.
Personally, while I think the “Earn” programs offered by CEXs are debt securities, I think it’s *possible* to offer pure PoS as a service, even on a CEX, without the offer is a security, according to the detailed terms. But tbqh it’s a close case.
— _gabrielShapir0 (@lex_node) February 8, 2023
Coinbase is currently the subject of an ongoing SEC investigation, which Coinbase disclosed in an August 9, 2022 SEC deposit was in connection with its staking rewards among other offers.