Coinbase’s plans to offer users 4% interest via its ill-fated Lend accounts may be dead in the water thanks to the SEC, but regulators are so far unable to prevent token holders from earning yield by crypto staking.
As reported by Bloomberg, Coinbase launched its Ethereum 2.0 staking program earlier this year, and had picked up nearly 2 million users in the first two months.
At the moment, the Delaware-headquartered exchange offers annual rates of 5% to stake Ether and Cosmos, 4.63% to stake Tezos, and 4% for Algorand.
Despite some of these returns eclipsing the company’s proposed lending product — it seems that nobody, least of all the SEC, is sure how to approach staking.
Speaking via Bloomberg, Columbia Business School professor R.A. Farrokhnia said (our emphasis).
“This is part of a broader dichotomy happening where the innovators are innovating at a much faster clip than ever before, and the regulators, the legal system and lawmakers can’t keep pace.”
“That gap always existed between innovators and regulators. But that’s becoming almost a chasm now.”
Indeed, the New York State Attorney General (NYAG) this week wrote to three crypto lenders, asking them to “identify and describe each lending, loan, interest, or deposit/earnings product you offer.”
The NYAG also served two others with cease-and-desist notices, ordering them to stop offering their services to New Yorkers.
Coinbase itself doesn’t seem certain of how regulators view staking. In its most recent quarterly filing, the company clarified:
“We also offer various staking, rewards, and lending products, all of which are subject to significant regulatory uncertainty, and could implicate a variety of laws and regulations worldwide.”
Coinbase keeps staking through regulation pitch
When asked by Bloomberg about regulatory uncertainty in the wake of the SEC serving Coinbase the fatal Wells notice, a company spokesperson said: “We don’t have anything additional to add here though I’m sure you saw our news out this AM.”
This is likely a reference to the exchange publishing its own thoughts on how the US should approach digital assets.
The firm’s proposal, titled Digital Asset Policy Proposal: Safeguarding America’s Financial Leadership (dApp) suggested:
- establishing a new regulatory framework for digital currencies;
- identifying a single authority for crypto markets;
- increasing clarity around digital assets and working to “protect and empower” digital asset holders.
Any crypto regulation should promote interoperability, fair competition, and “responsible innovation,” said Coinbase.
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