Coinbase CEO Brian Armstrong is attempting to quell speculation that the exchange's staking products should be classified as securities by the US Securities and Exchange Commission (SEC).
In a recent interview with Bloomberg, Armstrong said, "Our staking product is not a security. 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."
The SEC has been broadening its investigation into crypto exchanges and has targeted staking products for potential securities violations. Last month, the regulator settled with rival exchange Kraken for allegedly failing to register its staking-as-a-service program. Kraken agreed to pay $30 million in disgorgement, prejudgment interest and civil penalties.
Now, the SEC is turning its attention to Coinbase's staking products. The regulator is investigating whether Coinbase's staking products meet the legal definition of a security under the US Securities Act.
Coinbase has been struggling financially in the crypto winter. The exchange posted a $557 million loss in the fourth quarter and saw revenue tumble 75% year-over-year. However, its share price has rebounded sharply this year, gaining over 90% in 2023.
Armstrong's comments come as the SEC continues to grapple with the question of how to regulate the crypto industry. The agency has yet to provide clear guidance on the issue, leaving many exchanges uncertain about how to proceed.
It remains to be seen whether the SEC will accept Armstrong's argument that Coinbase's staking products are not securities. But one thing is certain: the crypto industry is watching the regulator's next move closely.