Coinbase, the biggest cryptocurrency exchange in the United States, has paused staking services for customers in California, New Jersey, South Carolina, and Wisconsin. It would appear that there are some regulatory concerns that need to be addressed by regulators in these states as Coinbase battles with its Securities and Exchange Commission (SEC).
Staking In The US
Staking crypto has become the norm, especially as many blockchains are now relying on the proof-of-stake (PoS) consensus mechanism. The US is home to the biggest crypto stakers in the world, and Coinbase is at the forefront of staking services in the country.
Their staking program allows users to earn rewards for locking in certain crypto assets. And according to the crypto exchange, 46% of those that stake the most Ethereum are in the US.
One problem that the exchange has encountered though is the laws around cryptocurrency staking are complex and still being interpreted, particularly as the SEC recently took the exchange to court in June regarding its retail staking services. As a result, some states have asked Coinbase to pause their staking programs while regulations are clarified.
On July 14, Coinbase announced on Twitter and its blog that California, New Jersey, South Carolina, and Wisconsin users will no longer be able to access its staking services. This pause prohibits the staking of new and additional cryptocurrencies, but those staked before the order was issued remain unaffected.
Other states, including Alabama, California, Illinois, Kentucky, Maryland, New Jersey, South Carolina, Vermont, Washington, and Wisconsin, have reportedly also started proceedings against Coinbase, but staking is still available in those states.
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Although staking is still available to the vast majority of Coinbase customers in the US, there is no clear timeline for when staking may resume in the impacted states. However, Coinbase continues to insist that it strongly disagrees with any allegation that its staking services are securities.
“Nothing about Coinbase’s staking services is an investment at all. Rather, staking is a core part of ensuring that the crypto economy functions for hundreds of millions of users around the globe,” the exchange said.
What Does This Mean For Staking?
While countries in the Europe and Middle East are starting to develop clear rules for crypto assets, the SEC has said that some cryptocurrencies qualify as securities, which would subject them to strict regulation.
The pause in staking services by Coinbase in these US states shows the uncertain regulatory landscape for cryptocurrencies in America. The regulatory uncertainty around staking and other crypto services poses risks for investors and the industry, which could hamper the mainstream adoption of cryptocurrencies in the country.