Rumors of an impending crypto ban came on February 9 with the Securities and Exchange Commission’s enforcement action against Kraken, which led to a settlement in which the exchange agreed to stop staking services for American users. The act will apply to all companies based in the United States.
The reaction is predictable depending on where you stand on crypto in general. Crypto supporters lash out at regulators who are slow to disrupt this burgeoning industry, while skeptics celebrate the impending death of crypto. Advocates have rights. Antagonistic regulators will force crypto into friendlier jurisdictions, which will reap economic benefits. The skeptics are also right. This event, and many from last year, killed crypto. His apparent misplaced pleasure, however. This is a good thing.
Abandoned by many crypto businesses in 2022, the SEC and the Commodity Futures Trading Commission have begun to take a harder line with the crypto industry. They have targeted the fiat on-ramp through US banks. They are now targeting staking. Brian Armstrong, CEO of the centralized exchange Coinbase, said on February 9 that “the SEC wants to get rid of crypto staking in the US for retail customers.” A day later, Kraken announced it would shut down its staking-as-a-service program as well as pay a $30 million fine. Now it seems that something similar to the staking ban will apply to all US-based companies.
Armstrong rightly stated in his tweets that the staking ban “will be a terrible road for the US if it is allowed to happen.” If U.S. regulators push too hard, they may be responsible for the weakening of the U.S. crypto industry to other countries. Better stop now because the crypto business has left the United States.
1 / We heard rumors that the SEC wants to get rid of crypto staking in the US for retail customers. I hope that is not the case because I believe it will be a bad road for the US if it is allowed to happen.
— Brian Armstrong (@brian_armstrong) February 8, 2023
The latest action by the SEC has even drawn criticism from the SEC. Commissioner Hester Peirce objected to this enforcement action, stating that “using enforcement action to tell people what the law is in a growing industry is not an efficient or fair way to regulate it.” This creates uncertainty and deters investment. What is needed are fair and clear rules. Otherwise, America’s leadership in crypto will disappear.
However, the ban on staking is good for crypto.
Good luck.
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Staking with an incorporated business is antithetical to creating a special crypto. Staking is used to secure global networks like Ethereum, which are designed so that no one person can control them. Since the company operates under the government, there is a clear dissonance between them and staking. This may not be a problem if the business represents an insignificant amount of total staking activity, but only Coinbase and Kraken, both domiciled in the US, represent approximately 20% of total ETH staked.
It would be nice if all government regulated companies had less than 10% of the stake of Ethereum, or any public blockchain. It may be that the fastest way to achieve this change is to ban staking! After Mr. Armstrong’s tweets, the price of decentralized staking project tokens got a boost. Hopefully, this will increase your staking percentage. There is another bump to the Kraken announcement. If the SEC continues, expect to see a significant shift from centralized staking to decentralized.
This is part of a larger trend in the crypto industry since last year. As opaque crypto business after business went bankrupt like falling dominoes, people started looking for viable on-chain alternatives. Suddenly, the strange values that defined early crypto users are no longer strange – for example, “not your key, not your coin” or “don’t trust, verify.”
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People are starting to look to untrusted platforms for things like derivatives and yields. We can probably add staking to the list, too. Fortunately, on-chain technology is now mature enough to offer the same experience as centralized services. This experience will only get better as technology continues to rapidly evolve, and more people move assets on-chain.
Fiat on-ramp exchanges like Coinbase will always play an important role in crypto, but it is clear that eventually, every crypto-to-crypto service offered by these intermediaries will retire in favor of superior decentralized alternatives.
For the skeptics who say “crypto is dead.”
Simply reply, “Yes, crypto is dead. Long live crypto.”
Dennis Jarvis is the CEO of Bitcoin.com. He previously held various management and product management roles at Apple, Rakuten and book distribution startup Orb. He earned a bachelor’s degree in economics from Temple University and is an outdoor and skiing instructor.
This article is for general information purposes and is not intended and should not be construed as legal or investment advice. The views, thoughts and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.