Are Regulators Targeting Crypto Staking? Rumors Suggest New SEC Probe

As US regulators continue to tighten their crypto reigns, rumors are swirling that the next target could be the practice of cryptocurrency staking.

“We’ve heard rumors that the SEC wants to remove crypto staking in the US for retail customers,” Coinbase co-founder and CEO Brian Armstrong tweeted on Wednesday. “I hope that’s not the case because I think it’s a terrible path for the US if that’s allowed to happen.”

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 commentator claimed to have confirmed a multi-agency action against Coinbase. However, sources close to the matter are speaking out Decrypt that claim is baseless.

After the collapse of FTX in November 2022, the SEC made cryptocurrency and digital assets a top priority in its investigation division for 2023.

“The Division will conduct examinations of broker-dealers and RIAs that use new financial technologies or use new practices, including technological and online solutions to meet compliance and marketing demands. and to service investor accounts,” the agency said.

Also on Wednesday, Bloomberg It has been reported that cryptocurrency exchange Kraken is facing an SEC probe for allegedly offering unregistered securities, citing a person with knowledge of the matter.

The SEC and its chair Gary Gensler have long been charged with regulation through enforcement, something Armstrong and others say will encourage companies to operate offshore. But regulators and politicians like US Senator Elizabeth Warren say the crypto industry is “fearful of a strong SEC,” adding that the agency needs to do more for the entire crypto market. .

“We must ensure that new technologies are encouraged to grow in the US and are not held back by a lack of clear rules,” Armstrong wrote. “When it comes to financial services and Web3, it is a matter of national security that these capabilities are built in the US”

In a tweet posted an hour after Armstrong’s first thread, Coinbase tweeted its support for staking, saying it has the potential to accelerate the adoption of digital payments across the board. world because it does not rely on setting up expensive centralized intermediaries.

“To be successful staking must remain decentralized, neutral, and global,” Coinbase wrote.

Other US agencies involved in crypto include the FTC, CFTC, Justice Department, and IRS, which was sued by a Tennessee couple trying to recover federal income taxes imposed on Tezos generated by the Tennessee couple’s stake. in 2021.

The case stems from a Tezos user who was denied a refund from the IRS, which said the partners owed taxes for earning staking rewards.

The lawsuit was joined on Tuesday by crypto giant ConsenSys, which said it would financially support the challenge.

“I hope so,” Armstrong wrote. “We can work together to promulgate clear rules for the industry, and create reasonable solutions that protect consumers while preserving innovation and US national security interests”