'Staking' Product Not a Security, Says Coinbase CEO Brian Armstrong

In the midst of a broad regulatory crackdown, Brian Armstrong, co-founder and CEO of Coinbase Worldwide Inc., reaffirmed that the "staking" product offered by the largest US bitcoin exchange shouldn't be categorized as a security.

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In an interview with Trade Algo, Armstrong declared, "Our staking product is not a security. Consumers never entrust Coinbase, for example, with their assets. And all we're doing is passing those currencies through a service that enables users to take part in the decentralized process known as staking.

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Staking works by allowing users to earn rewards in exchange for permitting the use of their tokens to speed up transactions on a blockchain.

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Armstrong and US Securities and Exchange Commission Chairman Gary Gensler have previously differed, and the company recently stated that it may not remove a specific cryptocurrency asset without a final legal ruling, even if the SEC contends that it is a security. According to Coinbase, the SEC has issued investigating subpoenas regarding staking, stablecoins, and yield-generating products.

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We are ready to defend the staking product in court if necessary, according to Armstrong. But, we never seek conflict. We aim to cooperate with regulators from every country.

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Rival exchange Kraken reached a settlement with the SEC last month to shut down its US staking operation, in which consumers received dividends on tokens. Paxos Trust Co. discontinued issuing a USD stablecoin with the Binance brand after coming under pressure from New York officials. The SEC has put up a proposal to tighten up custody regulations for cryptocurrencies.

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Notwithstanding what happened with Paxos, Armstrong added that he does not "have reservations" about the wider stablecoin sector in digital assets and that he is "very enthusiastic" about USD Coin, another Circle-issued stablecoin tethered to the dollar.

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To minimize its reliance on retail-driven trading revenue, which frequently reflects the sharp fluctuations in cryptocurrency prices, Coinbase has started launching additional goods and services. The last four quarters have seen a loss for the company. Last week, Coinbase introduced a blockchain, extending the exchange's reach further into the worlds of nonfungible assets and decentralized banking.

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In the fourth quarter, Coinbase reported a $557 million loss and saw revenue fall by 75% as trading volumes fell due to a number of high-profile scandals and bankruptcies in the industry.

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After falling 86% in 2022, Coinbase stock has increased by more than 80% this year, reaching about $64. When the company was initially launched on the Nasdaq Stock Exchange in April 2021, the shares were trading at over $400.