Brian Armstrong – the brains behind Coinbase – hit back at rumours of an incoming US crypto staking ban.
Taking to twitter. The Coinbase CEO argued that staking is vital. Ensuring users can contribute to the running of decentralised networks while also boosting scalability and network security.
Armstrong also highlighted the importance of Proof of Stake technology for reducing the industry’s carbon footprint.
Staking ban is ‘national security issue’
In the past regulators have heavily criticised the carbon footprint of Proof of Work (PoW) ‘mining’ technology. Some nations including China used excessive energy consumption from PoW as the rationale behind their crypto bans.
The crypto industry in turn pinned their hopes on Proof of Stake as a greener alternative. With substantially reduced energy consumptions aiming to quell regulators attacks. In Q4 2022 there was $42bn staked in crypto, with $3bn staking rewards given.
Yet, it appears regulators have now changed from an environmental to a financial criticism. Alleging that staking technology is in effect the operation of an unlicensed security product.
Armstrong pointed out that lawmakers risk suffocating a young tech industry. As regulators fail to wrestle with the crypto industry, the lack of sensible and clear rules is stifling growth.
This the CEO argues is becoming an issue of national security. The floundering of dinosaur regulators in the US is pushing the industry players and by extension fintech and Web3 development overseas. He cited the spectacular collapse of FTX in the Bahamas as an obvious case.
With a powerful voice in the industry, Armstrong’s tweets have caused quite a stir. This comes as Coinbase itself, and rival Kraken exchange have both ended up under probe by the SEC over unregulated securities offerings.
Hoskinson says ETH is ‘problematic’
Charles Hoskinson – the founder of Cardano – added to the debate thread.
The ADA boss suggested that Ethereum’s staking model is problematic. It risks failing the Howey test as holders give their assets to someone else for a return. This is different he argues from non-custodial liquid staking, and more reminiscent of traditional mining pools.
Hoskinson went on to explain that slashing and bonds are bad. With project features such as locking funds, centralisation of staking, and poor protocol design all risk factors.
The Cardano CEO’s concern is that the lumping together of all proof of stake technology by regulators. Without respect for the nuanced differences in how they function, could be a huge mistake.
Rumours that the Securities and Exchange Commission (SEC) want to ban staking stem from remarks made on September 15 to reporters after a Senate Banking Committee meeting.
SEC Chairman Gary Gensler has said proof of stake coins could be considered securities under the Howey test. Arguing the staking public is expecting profits based on the efforts of others.
But notwithstanding these new efforts to nail down crypto, Washington’s bureaucratic politics model might be the biggest challenge.
Despite the SEC’s rumoured plans to ban staking. Ethereum has already classified as a commodity not a security by rival agency the CFTC. And in an ongoing case in Tennessee the IRS are being sued for imposing federal income tax on a couple’s Tezos staking income.
This begs the question, are the SEC really in charge? And why are the US government happy to tacitly legitimise staking through taxation?
This news is republished from another source. You can check the original article here.
Be the first to comment