Coinbase CEO Brian Armstrong has attempted to quell speculation that his exchange’s staking products should be classified as securities, raising the ante in the ongoing debate over crypto regulations with the United States Securities and Exchange Commission. , or SEQ.
In a televised interview with Bloomberg on March 1, Armstrong saying, “Our staking product is not a security,” referring to cryptocurrencies that can be staked directly on the exchange to generate returns. He continued:
“Customers never hand over their assets to Coinbase, for example. And we’re really just providing a service that goes through those coins to help them participate in staking, which is a decentralized protocol.”
WATCH: Coinbase CEO Brian Armstrong joins Bloomberg TV after the largest US cryptocurrency exchange posted a $557 million loss and revenue fell 75% in Q4 https://t.co/zEfQ0mSMe0 https://t.co/dJAkxCtft8
— Bloomberg Markets (@markets) March 1, 2023
Armstrong’s explanation reflects guidance provided by Coinbase chief legal officer Paul Grewal, who told shareholders last month that the exchange’s staking products differ fundamentally from the yield products targeted by the SEC. Grewal was referring specifically to the recent SEC enforcement action against rival exchange Kraken, which settled with the securities regulator for allegedly failing to register its staking program as a service. As part of their settlement, Kraken agreed to pay $30 million in repayment, pre-judgment interest, and civil penalties.
After settling with Kraken, the SEC has turned its attention to Coinbase’s staking products. Specifically, the regulator is investigating whether Coinbase’s staking products meet the legal definition of a security under the US Securities Act.
Related: Crypto Biz: Coinbase has a lot at stake
Coinbase has hemorrhaged money during the crypto winter, posting a $557 million loss in the fourth quarter. Revenue plummeted 75% year-over-year as trading volumes dried up.
After plunging 86% in 2022, Coinbase’s share price has rebounded considerably this year. The stock is currently trading around $64, having gained over 90% in 2023.
