Shares of major US cryptocurrency exchange Coinbase (COIN) suffered their biggest daily loss in seven months after the country’s Securities and Exchange Commission (SEC) forced rival exchange Kraken to close its trading. cryptocurrency staking services in a $30 million settlement agreement.
The decline in the value of COIN can be attributed to the fact that Coinbase generates significant revenue from its cryptocurrency staking services, and the SEC is allegedly cracking down on such services.
COIN sinks more than 14%
COIN closed at $59.63 on Thursday from the day’s starting price of $68.51 and is trading at $58.99 at the time of writing, indicating a 14.13% drop.
The last time the action suffered such a huge loss in one trading day was in July, when Coinbase faced an SEC investigation into its cryptocurrency listings. The regulator examined whether the exchange allowed US clients to trade crypto tokens that should have been registered as securities.
SEC Goes After Crypto Staking Service Providers
Let’s remember that Kraken came to a settlement deal with the SEC yesterday after months of regulatory investigations into unregistered securities offered as staking services. The exchange agreed to pay $30 million in return and civil penalties and to discontinue its staking platform.
The development came just a day after Coinbase CEO Brian Armstrong. shared an update on rumors about the SEC halting cryptocurrency staking for US retail users. The CEO argued that staking should not be classified as a security, citing a Paradigm article on Ethereum’s new staking model .
Notably, Coinbase is the second largest depositor of Ether (ETH) after the Lido liquid staking protocol, followed by Kraken and Binance.
For Coinbase, staking revenue represented 11% of net income in Q3 2022, an increase from 8.5% in the previous quarter. The SEC’s actions could spell trouble for the exchange as crypto asset prices are still struggling to recover from the winter of 2022.
Grewal: Coinbase’s staking services are different
Meanwhile, Coinbase chief legal officer Paul Grewal believes the SEC ruling does not apply to the exchange’s staking program.
Commenting on the Kraken vs. SEC, Grewal saying:
“Coinbase’s staking program is not affected by today’s news. What is clear from today’s announcement is that Kraken was essentially offering a performance product. Coinbase’s staking services are fundamentally different and are not securities.”
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