Coinbase CEO is concerned about the SEC’s ambitions to crack down on crypto staking

Coinbase CEO is concerned about the SEC’s ambitions to crack down on crypto staking

On February 9th, Brian Armstrong warned that they were hearing rumors that the SEC was “looking to eliminate retail crypto staking in the US.”

He said he hoped that wasn't the case because "I think it would be a terrible path for the United States if that were allowed to happen."

Armstrong highlighted some of the benefits of staking, adding that it brings many positive improvements to the industry. These include scalability, increased security, reduced carbon footprint and the ability for users to participate in the operation of a crypto network.

1/ We are hearing rumors that the SEC wants to eliminate retail crypto staking in the US. I hope this is not the case as I believe it would be a terrible path for the US if this were allowed to happen.

– Brian Armstrong (@brian_armstrong) February 8, 2023

SEC: Regulation through Enforcement

However, the SEC has different ideas and wants to treat proof-of-stake tokens the same way as stocks - as securities.

The Coinbase boss warned that the United States should be a place where new technologies and innovations are encouraged “and not stifled by the lack of clear rules.”

“When it comes to financial services and Web3, it is a matter of national security that these capabilities are expanded in the United States.”

The SEC has regulated through enforcement with its constant raids and lawsuits against crypto companies. It has yet to provide clear guidance or frameworks for fintech companies, instead conducting industry searches to look for targets it can accuse of selling securities.

“Regulation through enforcement doesn’t work,” Armstrong said, before adding: “It encourages companies to operate offshore, which is what happened with FTX.”

Last year, Paradigm released a report saying that proof-of-stake does not involve an “ordinary entity,” as described in the Howey test that the SEC uses to determine what it considers a security. The report concluded:

“In analyzing the economic realities of staking ETH onto Ethereum’s proof-of-stake network, a court should find that staking does not meet the Howey test because there is no “common enterprise” and validators never rely on the “efforts of others.” ”

Cardano founder has a dig

Cardano founder Charles Hoskinson took the opportunity to take a swipe at his competitor instead of standing together for the good of the entire industry.

"Ethereum staking is problematic. If you temporarily give your assets to someone else in order to receive a return, it looks a lot like regulated products."

The SEC has suggested that ETH is a security due to its staking mechanism, but then the premise could apply to all proof-of-stake tokens should it become law.

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