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Coinbase CEO Brian Armstrong said on Feb. 8 that his company has heard rumors that the United States’ main securities regulator intends to ban staking.
Armstrong wrote on Twitter:
"We hear that the U.S. Securities and Exchange Commission would like to get rid of crypto staking in the United States for retail clients. I hope not, because I think it would be terrible for the United States to have this happen."
Stapling is the process of depositing a cryptocurrency in a contract. Those that do earn interest on their deposit, and they can validate the blocks if they line up. The practice is seen as much more effective and scalable than alternatives such as bitcoin extraction.
Armstrong advocated for that practice. He said that "sequencing is not a security" and added that it provides various advantages to cryptonets.
He also referred to an earlier debate that took place as Ethereum transitioned to a staking model last year. One argument against regulation at that time said that staking involves no common enterprise or intent to gain profits solely from the efforts of others — two criteria that are required for investment contracts to be regulated under securities law.
Coinbase has already been the subject of an examination by the Sec on products with adjoining interests. It canceled its Lend product after the regulator threatened charges in 2021. The firm also said in late 2022 that the SEC has requested information about its services including “its staking programs, and its stablecoin and yield-generating products.”
It is unclear if the SEC purports to prohibit staking by third-party suppliers such as Coinbase, or if it intends to restrict staking to a more fundamental level. However, it would be difficult for the regulator to achieve the latter if there is no fiduciary currency involved.
Prominent blockchains and coins that rely on staking include Ethereum (ETH), BNB Chain (BNB), Cardano (ADA), Polkadot (DOT), Avalanche (AVAX), and many others.
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