Coinbase CEO warns an SEC crackdown could be imminent It could also hurt Ethereum.
Font size
CEO of
Coinbase Global
warned the Securities and Exchange Commission may be considering breaking a process called staking. Any potential move would be bad for the crypto broker’s business and potentially harm
ether,
the following largest cryptocurrency
Bitcoin
.
Staking refers to a process that both strengthens the blockchain network and provides investors with a way to profit from their cryptocurrency holdings.
Although staking does not exist for Bitcoin, it makes Ethereum, one of the largest blockchains. Holders of Ether—the token of Ethereum—can lock or stake their tokens as collateral in a process that validates transactions and secures the network, earning money in the process. The current yield for staking Ether is up to 5%. “Valifiers” must lock up at least 32 Ether, or about $52,000, to participate in staking on Ethereum.
Enter Coinbase (ticker: COIN), itself a validator and there is a service that allows investors to place bets smaller amount of Ether. There is no minimum amount required, thus opening the door to profit opportunities for more people.
Investors earn a crypto return that would otherwise be unattainable, and Coinbase receives a fee: 25% of the Ether return. Analysts say it is the kind of diversification that Coinbase demand, as revenue from cryptocurrency transactions has Falling in tandem with Bitcoin’s price in the last year.
However, this business model may be considered by regulators
“We are hearing rumors that the SEC wants to eliminate crypto staking in the US for retail clients,” Armstrong said. said wednesday on Twitter. “I hope that’s not the case because I believe it would be a bad road for the United States if that were allowed to happen.”
The SEC declined to comment.
In its second-quarter financial filing last summer, Coinbase revealed that its staking program has been monitored from the SECwhich it said sent subpoenas and other document requests.
A potential staking ban would have a negative impact on both Coinbase and Ether. Coinbase will lose a high-margin revenue stream looks poised to be a pillar of growth. Ether will lose the participation of US retail investors — a group that played a large role in the cryptocurrency’s latest bull run — in staking. It will not affect Ethereum’s ability to function, but rather a push towards wider network adoption, which one will support the price?.
Armstrong, for his part, did not want this to happen.
“Staking is a really important innovation in crypto,” the Coinbase CEO said on Twitter. “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 footprint.”
Armstrong and others said that staking does not make Ether a security, which will put the coins under SEC regulation. But agents and brokers This comment has been made before: The SEC has said that some of the tokens Coinbase says are not securities but are.
With no confirmation from the SEC, these concerns are only concerns for now. But they add more uncertainty to cryptocurrencies and crypto companies are has faced threats out of the bear market, other regulatory pressures and investor interest waned.
Write to Jack Denton at [email protected]