Coinbase CEO Brian Armstrong suggested that the U.S. Securities and Exchange Commission (SEC) is preparing a ban for certain altcoins that would be highly effective. Armstrong said he has heard rumors that he wants to ban individual investors from participating in staking, the underlying income source of blockchains, including Ethereum. Here are the details…
Coinbase CEO reveals important claim for some altcoins
Coinbase CEO Brian Armstrong said that his company has heard rumors that the United States’ main securities regulator is planning to ban staking. “I hope that doesn’t happen because I believe it would be terrible for the United States if this were allowed to happen,” he tweeted.
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
While Armstrong’s skepticism surprised many in the industry, SEC Chairman Gary Gensler previously stated that cryptocurrencies that allow staking could be classified as securities under the Howey test. After a Congressional hearing in September 2022, Gensler told reporters that although he didn’t specifically mention any tokens, staking is “another indicator that under the Howey test, people who invest are expecting profits based on the efforts of others.”
Coinbase has already been subject to SEC scrutiny on adjacent interest-bearing products, as we reported on cryptokoin.com. Lend canceled its product after the regulator threatened to charge it in 2021. The firm also said that in late 2022, the SEC sought information on its services, including “staking programs, stablecoins and yielding products.”
Staking covers a significant portion of the cryptocurrency space
Staking involves depositing a cryptocurrency into a contract. Those who do so earn interest on their deposits and can validate blocks if they stake on-chain. The app is considered much more efficient and scalable than alternatives like Bitcoin mining. According to a report from Staked, a staking service provider, the value of staked assets was around $42 billion in the fourth quarter of 2022, with annual staking rewards of $3 billion. This figure was not limited to individual investors.
Alison Mangiero, executive director of the Proof of Stake Alliance (POSA), said her organization opposes any claim that staking constitutes an unregistered security. “Staking tends to be misunderstood with unrelated activities like lending, but staking is basically a way for everyone to participate in providing security for the proof of stake networks,” Mangiero said.
Which coins can be affected?
Leading Blockchains and coins based on staking include Ethereum (ETH), BNB Chain (BNB), Cardano (ADA), Polkadot (DOT), Avalanche (AVAX), Near Protocol (NEAR), Ankr (ANKR) There are cryptocurrencies such as Mina (MINA), Injective (INJ), Skale (SKL).
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