Coinbase CEO Brian Armstrong has attempted to quell speculation that his exchange’s staking products should be classified as securities — upping the ante in the ongoing debate around crypto regulations with the United States Securities and Exchange Commission.
In a televised interview with Bloomberg on March 1, Armstrong said, “Our staking product is not a security,” referring to cryptocurrencies that can be staked directly on the exchange to generate yields. He continued:
“Customers never turn their assets to Coinbase, for instance. And we really just are providing a service that passes through those coins to help them participate in staking, which is a decentralized protocol.”
WATCH: Coinbase CEO Brian Armstrong joins Bloomberg TV after the biggest US cryptocurrency exchange posted a $557 million loss and saw revenue tumble 75% in the fourth quarter https://t.co/zEfQ0mSMe0 https://t.co/dJAkxCtft8— Bloomberg Markets (@markets) March 1, 2023
Armstrong’s explanation mirrors the guidance provided by Coinbase’s chief legal officer, Paul Grewal, who told shareholders last month that the exchange’s staking products fundamentally differ from the yield products the SEC is targeting. Grewal was referring specifically to the SEC’s recent enforcement action against rival exchange Kraken, which settled with the securities regulator for allegedly failing to register its staking-as-a-service program. As part of its settlement, Kraken agreed to pay $30 million in disgorgement, prejudgment interest and civil penalties.
After settling with Kraken, the SEC has turned its attention to Coinbase’s staking products. Specifically, the regulator is investigating whether Coinbase’s staking products meet the legal definition of a security under the U.S. Securities Act.
Related: Crypto Biz: Coinbase has a lot at stake
Coinbase has been hemorrhaging money during the crypto winter, posting a $557 million loss in the fourth quarter. Revenues plummeted 75% year-over-year as trading volumes dried up.
After falling 86% in 2022, Coinbase’s share price has rebounded sharply this year. The stock is currently trading around $64, having gained over 90% in 2023.