Coinbase Not Planning to Halt Staking Program Despite SEC Crackdown on Service

Coin base’s legal officer said the Kraken incident would not affect its staking program.

Coinbase, a leading cryptocurrency exchange based in San Francisco, has announced that it will not halt its crypto staking program despite reports of the SEC’s crackdown against crypto staking services in the U.S.

Recall that the industry was thrown into a heavy shock yesterday after the SEC announced that U.S.-based crypto exchange Kraken had been charged with offering unregistered securities via the sale of its staking-as-a-service program. 

“To settle the SEC’s charges, the two Kraken entities agreed to immediately cease offering or selling securities through crypto asset staking services or staking programs and pay $30 million in disgorgement, prejudgment interest, and civil penalties,” said the securities watchdog. 

Reacting to the development, Coinbase, through its Chief Legal Officer Paul Grewal, said the exchange’s staking program will continue to be available to United States clients. 

Coinbase Staking Program Different From Kraken

Grewal assured Coinbase customers that the news of Kraken agreeing to shutter its cryptocurrency staking service would not affect its staking program. Coinbase noted that the announcement proves that Kraken was not offering a staking program but a yield product. 

The San Francisco-based exchange assured clients its staking program differs from Kraken’s. It added that the service does not constitute security. 

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“What’s clear from today’s announcement is that Kraken was essentially offering a yield product. Coinbase’s staking services are fundamentally different and are not securities,” Grewal said in a screenshot shared on Twitter by Frank Chaparro, a journalist, and editor at large at The Block.

In an attempt to further explain the distinction between Coinbase and Kraken’s staking program, Grewal said customers’ rewards heavily depend on the rewards paid by the protocol.

Furthermore, Chaparro disclosed in the tweet that the exchange is committed to engaging the SEC in a legal battle if the regulator attempts to crack down on its crypto-staking service.

Coinbase says Kraken news will not affect their staking program

Sources say they’re willing to fight SEC on this issue pic.twitter.com/6gMES5r50q

— Frank Chaparro (@fintechfrank) February 9, 2023

Grewal’s comments come after Coinbase CEO Brian Armstrong posted a rumor on Twitter about the SEC’s plan to “get rid” of crypto staking services for U.S. retail customers.

1/ We’re hearing rumors that the SEC would like to get rid of crypto staking in the U.S. for retail customers. I hope that’s not the case as I believe it would be a terrible path for the U.S. if that was allowed to happen.

— Brian Armstrong (@brian_armstrong) February 8, 2023

It only took a few hours before the Securities and Exchange Commission announced that Kraken exchange had agreed to shutter its crypto staking service. Following the SEC’s announcement, crypto assets took a significant hit that wreaked havoc on the prices. At press time, Bitcoin is down 3.6% to $21,857 in the past 24 hours, while Ethereum plunged 5.2% to $1,545 on the daily chart. In addition, Coinbase shares dipped over 14% in the late hours of yesterday after the SEC’s announcement.

Ripple CEO Reacts

Reports about the SEC’s crackdown on crypto staking services have sparked reactions among crypto industry members. Reacting to the development, Ripple CEO Brad Garlinghouse explained that other countries, including Australia, United Arab Emirates (UAE), Brazil, and South Korea, have been taking significant steps toward establishing more transparent cryptocurrency regulations. 

Garlinghouse’s comments suggest that these countries are leaving the United States behind in innovation.

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