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Coinbase Shares Fall After SEC Crackdown On Crypto Staking

Summary:

  • Coinbase, a leading crypto exchange, saw its shares fall by 14% after the SEC took action against crypto staking at rival exchange Kraken.
  • The SEC stated that Kraken agreed to stop unregistered offer and sale of crypto staking and settled for a $30 million fine.
  • Coinbase is also involved in similar activities through its Earn service and CEO Brian Armstrong argued that building such capabilities is a matter of national security.

 

Coinbase, one of the leading crypto exchanges, saw its shares fall by more than 14% on Thursday following news that the SEC is taking action against crypto staking at its rival exchange, Kraken.

 

In a press release, the US Commission said that Kraken agreed to stop the unregistered offer and sale of its crypto asset staking-as-a-service program and settled for a $30 million fine.

 

What is crypto staking? It involves investors locking up their crypto tokens with a blockchain validator with the goal of being rewarded with new tokens when their staked crypto tokens become part of the validation process for the blockchain. The issue is that investors lose control of their tokens once they stake them, and it is a high-risk process with no protection.

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“In case after case, we have seen the consequences when individuals and businesses promote and offer crypto investments outside of the protections provided by federal securities laws: investors lack the disclosures they deserve and are harmed when they don’t receive them,” said Gurbir S. Grewal, the Director of the SEC’s Division of Enforcement.

 

Coinbase is also involved in similar activities via its Earn service, which offers 6% interest rates to customers and charges a staking commission. According to CNBC, this service was so lucrative for the platform that 10% of its total revenue in Q3 2022 came from it.

 

Coinbase CEO Brian Armstrong | Coinbase Shares Fall After SEC Crackdown On Crypto Staking
Coinbase (COIN) CEO Brian Armstrong. Image Source: Bloomberg.

 

Coinbase CEO Brian Armstrong expressed concern about the SEC action against crypto staking in the US early Thursday, ahead of the Kraken fine. He argued that it was a matter of national security to build such capabilities in the country.

 

Before Thursday’s drop in value, Coinbase shares had risen over 77% in 2023 after a difficult 2022.

 

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Onwuasoanya Obinna

A reader of books and stringer of words. Passionate about Science and Tech. When not writing or reading he is surfing the web and Tweeting.