SEC Said to be Considering Retail Staking Ban

• The SEC is considering banning staking for retail users
• Coinbase CEO Brian Armstrong said he had heard “rumors” of an imminent ban
• Lawyer Jake Chervinksy said he was hearing the same

The Securities and Exchange Commission (SEC) is considering banning staking for retail users, according to several respected members of the cryptocurrency space. Coinbase CEO Brian Armstrong and crypto lawyer Jake Chervinksy are among those who have revealed that sources have informed them of the SEC’s plans, which will be a major blow to the stakers that have contributed over 16.5 million ETH to the Ethereum 2.0 staking contract.

“Terrible Path” for U.S., Says Armstrong

Armstrong was the first to post about the news last night, saying it would be a “terrible path for the U.S.” if it were to go ahead:

2/ Staking is a really important innovation in crypto. It allows users to participate directly in running open crypto networks. Staking brings many positive improvements to the space, including scalability, increased security, and reduced carbon footprints.

— Brian Armstrong (@brian_armstrong) February 8, 2023

Armstrong pointed to various enhancements that staking brings, including the encouragement of more environmentally friendly blockchains as well as increased scalability and security within blockchains themselves, while he also claimed that it was a “matter of national security” that such capabilities are “built out in the U.S.”

Chervinsky added that he had heard the same rumors, but advised caution that this is exactly what they are until proven otherwise. Chervinsky, who had a prominent role in the battle against the Infrastructure Bill in 2021, echoed Armstrong’s thoughts that banning staking for retail investors would be “an extreme error in US policy”. However, Chervinsky offered reality check:

Yet, rumors are often worse than reality.

While it’s good to follow stories like this, it’s important not to get carried away by every insinuation of impending doom that crosses your Twitter feed.

We have plenty of live challenges in crypto policy to handle. Let’s stay focused.

— Jake Chervinsky (@jchervinsky) February 9, 2023

Protecting Investors

The rationale behind the SEC potentially banning staking for retail users would likely be twofold – firstly the age-old adage of “protecting” investors, which also entails them not being given the chance to make a supplementary line of income at their own risk, and secondly because staking rewards could be considered securities. Of course, the SEC would help matters significantly if they actually informed people up front what does and doesn’t constitute a sale of securities when it comes to cryptocurrencies that would be a huge help to everybody, but this still seems like a faraway dream.

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