Coinbase CEO Brian Armstrong has recently spoken out about the possibility of the U.S. Securities and Exchange Commission (SEC) banning retail investors from engaging in cryptocurrency staking. Armstrong cited “rumors” that the SEC may put such a ban in place and said that it would be a “terrible path” for the U.S. if it were to be allowed to happen.
The SEC has declined to comment on the matter. However, back in September 2022 SEC Chairman Gary Gensler had mentioned that cryptocurrency tokens that allowed for staking could potentially be considered securities under the Howey Test. This has been a point of contention since the SEC had already classified Ethereum as a commodity by the Commodity Futures Trading Commission (CFTC).
Staking has become a popular source of income for many investors, with the total value of staked assets reaching $42 billion in the fourth quarter of 2022, and an annualized staking reward of $3 billion according to Staked, a non-custodial staking service provider. This figure includes not just retail investors.
Alison Mangiero, the executive director of the Proof of Stake Alliance (POSA), has stated that her organization stands against the potential assertion that staking constitutes an unregistered security. She further added that staking allows everyday Americans to join in providing security for proof-of-stake networks, and any regulatory action that goes against this would hinder the country’s efforts to foster domestic tech innovation.
UPDATE (Feb. 8, 2023, 23:25 UTC): Adds that the SEC declined to comment, as well as additional context.
UPDATE (Feb. 9, 2023 03:47 UTC): Adds comment from POSA.
