Coinbase CEO Brian Armstrong has addressed rumours about the US Securities and Exchange Commission potentially banning retail investors from engaging in cryptocurrency staking.
Staking is a way of putting cryptocurrency to use that’s at the core of blockchains such as Ethereum.
“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,” Brian tweeted on Wednesday.
While Armstrong’s suspicions might come as a surprise, the SEC’s Gary Gensler has previously said that cryptocurrencies which allow staking could be classified as securities based on the Howey test. However, the SEC is at odds with its sister regulator, the Commodity Futures Trading Commission (CFTC), which has designated ether as a commodity.
After a US Congressional hearing last September, Gensler told reporters that while he wasn’t referring to any particular coin or token, staking was “another indica that under the Howey test, the investing public is anticipating profits based on the efforts of others.”
A large amount of funds are staked. The value of said funds was around $42 billion in Q4 2022, with annualised rewards amounting to $3 billion, according to a report from non-custodial service provider Staked.
The executive director of the Proof-of-Stake Alliance (POSA), Alison Mangiero also told Coindesk that her organisation opposes any assertion that staking constitutes an unregistered security.
“Staking tends to get misconstrued with unrelated activities like lending, but staking is fundamentally a way for anyone to join in providing security for proof of stake networks,” Mangiero said.
“The existence of staking service providers allows everyday Americans to participate in staking, which democratizes network consensus and validation and is core to the continued growth of the global decentralized internet. Any regulatory action that runs counter to this misunderstands the nature of staking and hinders America’s ongoing efforts to foster domestic technological innovation.”