Tougher times ahead for retail crypto investors. According to the rumor shared by Brian Armstrong, Coinbase co-founder and CEO, the U.S. Securities and Exchange Commission (SEC) is considering a ban on crypto staking for individual investors.
In short, crypto staking is a way of earning rewards for temporarily locking your assets to help support operations on blockchain. As a result, crypto staking allows asset holders to make passive income without selling their cryptocurrency.
Crypto staking works for investors, but it also aids the network, bringing "many positive improvements to the space, including scalability, increased security, and reduced carbon footprints," says Armstrong. He also remarks that "it's a matter of national security" that web3 technologies, including financial services, be developed in the U.S. Armstrong also brings up the FTX case, suggesting that introducing regulation by enforcement may drive more companies offshore with FTX-like consequences.
The "leak" seems to be more than hearsay, as SEC's interest in regulating crypto staking has been known for at least half a year. In September 2022, Gary Gensler, the institution's chairman, suggested that cryptocurrencies allowing staking could be designated as securities under the Howey test. It's a set of standards for determining whether a transaction qualifies as an investment contract and should be deemed a security with all relevant disclosure and registration requirements.
SEC's potential move may have far-reaching consequences for the industry. According to the report by Staked and Kraken, the overall value of staked assets was $42 billion in the last quarter of 2022, while annualized staking rewards were estimated at $3 billion
Here's an interesting take on Armstrong's perspective.