IPO News: Coinbase Slumps as SEC Tightens Crypto Staking Regulations
The biggest US cryptocurrency exchange, Coinbase Global Inc., had its stock price drop the most in over six months after competitor Kraken was compelled to discontinue offering an investing option similar to one provided by Coinbase.
Kraken has agreed to cease offering its crypto staking products in the United States and pays $30 million to resolve the SEC’s charges that it had violated US regulations with these offerings, making this a major IPO news story for the crypto industry and a potential wake-up call for Coinbase and other crypto exchanges.
Paul Grewal, Coinbase’s chief legal officer, called the company’s on-chain staking services “fundamentally different” after Kraken’s settlement.
It is safe to continue participating in Coinbase’s staking program in light of today’s developments. Grewal told Bloomberg News in a statement. It is now very evident from today’s revelation that Kraken was effectively promoting a revenue product. In contrast to traditional securities, Coinbase’s staking services are not regulated in any way. With the news of Coinbase’s upcoming IPO, now is a great time to stay informed about the latest Coinbase news and developments surrounding the highly anticipated IPO.
The stock price dropped 14%, the greatest decrease since July 26. According to Bloomberg, at the time, the US government was looking into whether Coinbase should have allowed its customers to exchange digital assets that were not regulated as securities. In a statement released late Wednesday, Coinbase CEO Brian Armstrong predicted the settlement by criticizing the SEC for purportedly trying to eliminate crypto staking by ordinary investors.
As trading activity on exchanges like Kraken and Coinbase declines due to the price drop in digital assets, crypto-staking programs have become a substantial income source for these businesses.
Revenue from blockchain incentives, principally staking, increased from 8.5% of total revenue in the Q2 of 2022 to 11% in the Q3 of that year. When it comes to Ether, Coinbase is the number two depositor, behind only the original creators of the cryptocurrency. Exchanges and decentralized protocols like Lido and Rocket Pool have seen billions of dollars worth of Ether staked in exchange for returns.
Grewal said in an interview that the staking incentives on Coinbase are transparent and established by crypto protocols and that customers always retain ownership of their staked assets since “no transfer of titles” occurs.
In September of last year, when Ethereum shifted its consensus process to proof of stake, major exchanges like Coinbase and Binance began providing Ether holding services for its users. Because of this, anyone may now invest in the Ethereum blockchain and receive returns on their Ether currency.
CoinShares’ research associate Marc Arjoon suggested that the Kraken settlement will serve as a model for other exchanges that provide comparable solutions for their staking users.
Staking clients may now purchase derivative tokens on Coinbase and Binance. In the event that your Ether is locked on Ethereum, you may still exchange those tokens for other Ether at a rate of one token for one Ether. CoinGecko reports that the value of cbETH, Coinbase’s derivative token for facilitating transactions, has dropped 5.6% during the previous 24 hours.