“We hear rumors that the SEC wants to get rid of crypto-currency staking in the U.S. for retail customers“, Brian Armstrong, co-founder and CEO of Coinbase, tweeted on Wednesday. “I’hope not because I think it would be a terrible path for the U.S. if it were allowed.“
Staking is the process by which users can deposit proof-of-stake tokens on a blockchain to help secure the network, with stakers receiving rewards for doing so.
After Armstrong’s tweet, at least one other crypto Twitter commenter claimed to have confirmed a multi-agency action against Coinbase. However, sources close to the case said the claim was unfounded. Paul Grewal, Coinbase’s general counsel, succinctly stated, “Totally false“.
Totally false. https://t.co/YDvarmDCo9
After the FTX collapse in November 2022, the SEC has made crypto-currencies and digital assets a top priority for its 2023 review division.
“The division will conduct reviews of broker-dealers and RIAs that use emerging financial technologies or employ new practices, including technology and online solutions to meet compliance and marketing demands and to service investor accounts“, said the agency.
Also on Wednesday, Bloomberg reported that crypto-currency exchange Kraken is under investigation by the SEC for offering unregistered securities, citing a person with knowledge of the matter.
The SEC and its chairman Gary Gensler have long been accused of regulating by enforcement, which Armstrong and others say will encourage companies to operate overseas. But regulators and politicians like U.S. Senator Elizabeth Warren say the crypto industry is “scared of a strong SEC“, adding that the’agency needs to do even more on the’overall crypto market.
“We need to ensure that new technologies are encouraged to develop in the U.S. and are not stifled by the lack of clear rules“, writes Brian Armstrong. “When it comes to financial services and Web3, it is a matter of national security that these capabilities be developed in the United States.“
With the recent regulatory spotlight on staking, we’re taking this opportunity to build a deeper understanding of staking and its transformative role in processing digital financial transactions 🧵
— Coinbase (@coinbase) February 9, 2023
In a tweet posted an hour after Armstrong’s initial thread, Coinbase tweeted its support for staking, saying it has the potential to accelerate the adoption of digital payments on a global scale because it does not depend on setting up expensive centralized intermediaries.
“For staking to work successfully, it must remain decentralized, neutral and global“, Coinbase wrote.
Other U.S. agencies wading into crypto include the FTC, CFTC, Department of Justice and the IRS, which is being sued by a Tennessee couple trying to recoup federal income taxes levied on Tezos generated by the stake in 2021.
The lawsuit stems from the fact that a Tezos user was denied a refund by the IRS, which said the couple owed taxes for earning staking rewards.
But I refused the offer, because I know that until my case receives an official ruling, I have no certainty they won’t try to tax me again. pic.twitter.com/qrHU9iR3pf
— Josh Jarrett (@nohardforks) February 3, 2022
On Tuesday, crypto giant ConsenSys joined the lawsuit and said it would financially support the challenge.
“With a little luck“, Armstrong wrote. “We can work together to issue clear rules for the industry, and find reasonable solutions that protect consumers while preserving innovation and national security interests in the United States.“