Coinbase CEO Says SEC Is Planning to Ban Crypto Staking for US Citizens

In a major revelation, Coinbase CEO Brian Armstrong stated that the U.S. Securities and Exchange Commission (SEC) is planning to put a complete ban on crypto staking feature for native US citizens.

Armstrong strongly called out against such a measure adding that staking is an important part of innovation. “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,” he added.

So far, the SEC hasn’t responded to this news, however, securities agency has repeatedly stressed that most of the digital tokens functional today are subject to securities laws. Previously, SEC Chair Brian Armstrong had also indicated that staking could fall under the regulator’s purview.

Crypto staking is the process of earning rewards by locking up coins and helping order transactions on different blockchains such as the Ethereum. Centralized crypto exchanges like Coinbase and Kraken have delved into offering this staking features as it provides them an additional revenue stream.

These exchange allow retail players to stake coins without the need of any high-end equipment. In any case of an SEC crackdown on crypto staking, users are likely to move away from such centralized platform and rather opt for decentralized protocols such as Lido and Rocket Pool.

Explaining the importance os crypto staking, Brian Armstrong added: “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”.

The Coinbase CEO added that regulation by enforcement isn’t the right approach since it would rather encourage crypto firms to shift their bases outside the US. He further added that new technologies should be encourage in the US and not stifled through lack of clear rules. “When it comes to financial services and web3, it's a matter of national security that these capabilities be built out in the U.S,” he added.

Last year in August 2022, crypto exchange Coinbase disclosed that it’s being probed by the SEC over its staking program. Coinbase is currently the second-largest depositor of staked Ether.

Besides, Coinbase has been engaged with the SEC in small battles recently. The crypto exchange has to cancel its crypto-lending product amid heightened pressure from the SEC.

Staking services have been majorly in demand especially after Ethereum switched to a Proof-of-Stake (PoS) blockchain network last year. However, if the SEC’s crackdown news becomes a reality, it could be a setback for ETH investors worldwide.