Rumors: SEC to Ban US Retail Investors from Token Pledging, cbETH Under Coinbase Detach

Coinbase CEO Brian Armstrong claims to have heard rumors that the SEC will ban the provision of staking services to retail investors in the U.S. Armstrong has once again publicly called out regulatory agencies, and the staking token cbETH under its umbrella has experienced a negative premium.

Brian Armstrong's Tweets

1. We've heard news that the U.S. Securities and Exchange Commission (SEC) is considering banning U.S. retail investors from staking cryptocurrencies. I hope this is not the case, as I believe it would be a bad path for the U.S. to take.

2. Staking mechanisms are an important innovation in the crypto space, allowing users to directly participate and operate open-source crypto networks. Staking has brought many positive advancements to the crypto space, including scalability, increased security, and reduced carbon footprint.

3. Staking mechanisms do not fall under the category of securities. Here is a good introductory book on this topic.

4. We need to ensure that the U.S. encourages the development of innovative technologies locally, rather than stifling them due to a lack of clear regulations. Building these functionalities for financial services and Web3 domestically in the U.S. is crucial for national security.

5. Enforcement without regulation is completely ineffective. This has led crypto companies to operate outside the U.S., like FTX.

6. I hope we can work together to establish clear regulations for the crypto industry, propose sensible solutions, protect consumers, and safeguard the interests of U.S. innovation and national security.

SEC's Ambiguous Stance

CoinDesk reports that the SEC has declined to comment on this.

According to previous public statements by SEC Chairman Gary Gensler, he believes that cryptocurrencies and intermediaries allowing holders to "stake" tokens may meet the conditions for a securities determination under the Howey Test:

This is an indicator in the Howey Test that the investment public is profiting from the efforts of others.

Previous events like the Tornado incident have led to speculation that centralized staking providers would comply with Department of Justice sanctions on specific transactions. Brian Armstrong had previously stated that he would rather shut down staking services than comply with reviews, but did not rule out other options such as legal action.

Developer LukeYoungblood.eth, who assisted Coinbase in developing staking services, emphasized that all ETH nodes are located overseas, and Coinbase will definitely resist regulators to the end.

As of now, cbETH has experienced a slight price drop.