On Feb. 9, Brian Armstrong warned that they were hearing rumors that the SEC would like to “get rid of crypto betting in the US for retail clients.”
He said he hopes that is not the case, as “I think it would be a terrible path for the United States if that was 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 footprints, and allowing users to participate in running a cryptographic network.
1/ We are hearing rumors that the SEC would like to get rid of cryptocurrency staking in the US for retail clients. I hope that is not the case, as I think it would be a terrible path for the US if that were allowed to happen.
—Brian Armstrong (@brian_armstrong) February 8, 2023
SEC: Regulation by Execution
However, the SEC has other ideas and wants to treat proof-of-stake tokens the same way as stocks, like securities.
The Coinbase chief warned that the United States should be a place where new technologies and innovation are encouraged “and not stifled by a lack of clear rules.”
“When it comes to financial services and web3, it is a matter of national security that these capabilities are developed in the US.”
The SEC has been regulating via enforcement with its constant crackdowns and lawsuits against crypto companies. It has yet to provide clear guidance or a framework for fintech companies to operate, instead it sweeps the industry for targets it can accuse of selling securities.
“App regulation doesn’t work,” Armstrong said before adding, “It encourages companies to operate offshore, which is what happened with FTX.”
Last year, Paradigm issued a report stating that the proof of stake does not imply a “common enterprise” as detailed in the Howey test that the SEC uses to determine what it considers a security. The report concluded:
“In looking at the economic realities of staking ETH on the Ethereum proof-of-stake network, a court must find that staking fails the Howey test because there is no “common undertaking” and validators never trust the “Efforts of Others”. ”
Cardano founder has a dig
Cardano founder Charles Hoskinson took the opportunity to criticize his competitor instead of standing united for the benefit of the entire industry.
“Ethereum staking is problematic. Temporarily handing over your assets to someone else for a return is a lot like regulated products.”
The SEC has hinted that ETH is a security because of its staking mechanism, but then the premise could apply to all proof-of-stake tokens should it become legislation.
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