Coinbase CEO Brian Armstrong sounds the alarm over a potential “strike” crackdown
by Arthur · February 9, 2023
There are rumors that the Securities and Exchange Commission may want to end efforts for US retail customers, according to Coinbase CEO Brian Armstrong, who said that would have harmful consequences for the ecosystem and its investors, if true. “We are hearing rumors that the SEC wants to get rid of crypto betting in the US for retail clients,” he said in his tweet. “I hope that’s not the case, as I think it would be a terrible path for the United States if it were allowed to happen.” Crypto is no stranger to fear, uncertainty and doubt about government intervention. So far, the rumor Armstrong addressed is just that: a rumor. The SEC declined to comment for this story. Staking is not only a return-generating opportunity for crypto investors, it is also important to the way proof-of-stake protocols like Ethereum work. If there was some kind of stranglehold on staking or staking services, the outcome for Ethereum could be “catastrophic,” according to Oppenheimer analyst Owen Lau. “For Ethereum to work, you have to stake the ether on the network to support the transaction,” Lau said. “If no one can bet, how can you support the transaction being done on the network?” ETH.CM= 1D mountain The price of ether on Thursday Less than six months ago, Ethereum migrated to the “proof-of-stake” protocol, a technical upgrade known as the “Ethereum Merger” that was supposed to lower the network’s energy consumption by 99, 95%. In doing so, it also made some investors – those who choose to “bet” their ether on Ethereum to generate returns – into validators on the network. This made them essential to keep the network running. This opportunity is widely seen as a catalyst for mainstream crypto adoption and a revenue opportunity for exchanges like Coinbase. Coinbase said last summer that it was facing an SEC probe over its betting programs. A month later, in September, SEC Chairman Gary Gensler warned that crypto networks and intermediaries like Coinbase or Kraken, which allow people to stake their crypto, could trigger securities laws, the Wall Street Journal reported. Armstrong’s latest comments came a day before Kraken, one of Coinbase’s main exchange competitors, agreed to shut down its crypto betting operations to settle charges with the SEC, according to CoinDesk. The agency was scheduled to discuss and vote on the settlement on Thursday, the report said. Kraken declined to comment. The rules of the game The grumblings in the industry highlight a problem that has been a major headache for crypto companies for years: there are no clear rules for them to follow. “The better way for this industry to move forward is for Congress to just act right now, have a bill, get input from the public and decide which tokens are securities, which activities are securities and which are not, so that we don’t have these kinds of unnecessary public battles going forward,” Lau said. “We’re just too slow,” he added. “Whether you like it or not, if they define everything to be securities or define everything to be commodities … we need to have the clarity right now.” It’s not the first time a crypto leader has publicly battled with the SEC. Last summer, Grayscale sued the regulator after it rejected an application to turn the Grayscale Bitcoin Trust into an ETF. Many hoped to see faster action from regulators after the catastrophic fall of FTX in late 2022, though many on Capitol Hill may feel a sense of betrayal after the time Sam Bankman-Fried spent meeting with lawmakers and their staff, and having what could have been productive conversations and exchanges of ideas. With the growing popularity of crypto over the years, lawmakers and regulatory agencies have sharpened their understanding of the sector and the industry itself has stepped up its lobbying efforts. Still, many see enforcement action by the SEC as well as the Commodity Futures Trading Commission and the US Treasury, among other regulatory agencies, as the most likely way the rules of the road will be established. Already this year, the SEC has accused Genesis and Gemini of selling unregistered securities. “The industry doesn’t know what they’re thinking,” Lau said of the SEC. “Right now, there’s a vacuum, and the SEC can use that vacuum to exercise its power, to take enforcement actions.”
