Coinbase CEO Brian Armstrong has disclosed some unsettling rumors regarding the Securities and Exchange Commission’s (SEC) plans for crypto staking in the United States.
In a Twitter thread on Feb. 9, Armstrong alleged the SEC wanted to get rid of crypto staking for U.S. retail investors. Although he didn’t reveal the source of the rumor, he said that it would be a “terrible path” to take if this was true.
The Coinbase CEO argues that staking is a significant advancement in the crypto space that enables crypto enthusiasts to participate directly in the operation of open crypto networks. He also claimed it would improve the industry, including security, scalability, and lowering carbon emissions.
Aggressive regulation of crypto is not helping the industry
He continued, saying that overly aggressive policing of the crypto industry would be counterproductive and would only encourage businesses to relocate abroad to avoid regulatory watchdogs.
The Coinbase co-founder said he hopes the crypto community can help create sensible and transparent rules for the industry and that new technologies should be encouraged rather than stifled in the U.S.
In his Twitter thread, Armstrong cited a blog post published on Oct. 5, 2022, by Paradigm, a crypto investment company, which argued that Ethereum’s transition to proof-of-stake (PoS) and the new “staking” model available on the platform, as a result, do not qualify it as a security.
Paradigm’s post came in the wake of SEC Chairman Gary Gensler’s suggestion that regulators might regard proof-of-stake cryptocurrencies as securities under the Howey test.
Gensler made the remarks even though ethereum (ETH) has been classified as a commodity by another regulator, the Commodity Futures Trading Commission (CFTC).
Armstrong, along with many other players in the U.S. crypto industry, has decried this lack of regulatory clarity for a long time.
Staked assets are worth billions
According to Staked, a Kraken subsidiary that provides non-custodial staking services, the value of staked assets in the U.S. was around $42b in the fourth quarter of 2022, with annualized staking rewards of $3b.
These figures imply that a country-wide ban would significantly blow the U.S. crypto industry, which has already seen a substantial exodus of crypto-related businesses due to regulatory ambiguity.
Despite the SEC’s vigorous enforcement measures against the crypto industry throughout 2022, there are signs that it may step up its inspection even more in 2023. Earlier in the month, the Commission designated “emerging technologies and crypto-assets” as one of its major priorities for its Division of Examinations.
Additionally, the SEC is close to resolving its first prominent investigation of 2023. The Commission is looking into Kraken for selling unregistered securities. The regulator’s investigation is at an advanced stage. It might soon lead to a settlement with the San Francisco-based crypto exchange.