Banning retail crypto staking in the US would result in even more businesses moving offshore, argues the Coinbase co-founder.
The 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 the country’s regulators.
Armstrong made the comments in a Feb. 9 Twitter thread which has already been viewed over 2.2 million times, after noting they’ve heard “rumors” that the U.S. Securities and Exchange Commission “would like to get rid of crypto staking” for retail customers.
“I hope that’s not the case as I believe it would be a terrible path for the U.S. if that was allowed to happen.”
Armstrong did not share where the rumors originated from but continued to note that staking was “a really important innovation in crypto.”
“Staking brings many positive improvements to the space, including scalability, increased security, and reduced carbon footprints,” 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 reduced carbon footprints.
— Brian Armstrong (@brian_armstrong) February 8, 2023
Armstrong also referenced an Oct. 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.
The Paradigm post came just a few weeks after SEC Chairman Gary Gensler suggested that proof-of-stake (PoS) cryptocurrencies could trigger securities laws on Sep. 15, 2022, while speaking to reporters after a Senate Banking Committee meeting.
Armstrong also lambasted the current lack of regulatory clarity in the U.S. and subsequent “regulation by enforcement” that he says is driving companies offshore, such as crypto exchange FTX.
He has reiterated calls for regulation that provides clear rules for the industry while preserving innovation.
Related: Crypto exchange Kraken faces probe over possible securities violations: Report
According to Staking Rewards, the top four staked cryptocurrencies by market cap account for over $55 billion in staked assets, suggesting a country-wide ban would be a huge hit to the country’s crypto industry which has already seen an exodus of crypto-related businesses.
Some industry commentators have suggested that the SEC might go after centralized parties which offer staking services rather than the technology itself, believing the latter would be a losing battle which would “crush them in precedent.”
Timely reminder that https://t.co/splf30ft12 outlines the legal arguments of ETH staking under the Howey Test.
I believe the SEC would likely go after centralized parties offering staking, and not PoS itself as that’d be a harder fight that could crush them in precedent. https://t.co/YiD2Cpxx6z
— Adam Cochran (adamscochran.eth) (@adamscochran) February 8, 2023
The 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 a security, drawing parallels between them and other “Earn” products.
Personally although I do think “Earn” programs offered by CEXs are debt securities, I think it is *possible* to offer pure PoS as a service, even on a CEX, without the offer being a security, depending on the details of the terms. But tbqh it’s a close case.
— _gabrielShapir0 (@lex_node) February 8, 2023
Coinbase is currently subject to an ongoing SEC probe, which Coinbase revealed in an Aug. 9, 2022 SEC filing was in relation to its staking rewards amongst other offerings.
