- Coinbase CEO has no concerns over stablecoins and is bullish on USDC.
- Coinbase wants to work with regulators to protect customers, Armstrong said.
- Coinbase’s staking product differs from Kraken’s, as users retain custody of funds, he said.
- Coinbase offers 1.5% APY on holding USDC, which does not come from staking.
- SEC’s “investigative subpoenas” to Coinbase are just requests for information, he said.
Since the FTX collapse, crypto exchanges have been under intense regulatory scrutiny. Recently, stablecoins and staking products came under the crosshairs of the US Securities and Exchange Commission (SEC).
In these circumstances, investors became jittered about the performance of crypto exchanges. One of them is Coinbase, the largest US crypto exchange.
On Thursday, Coinbase co-founder and CEO Brian Armstrong addressed investor concerns in an interview with Bloomberg TV. Armstrong claimed Coinbase has nothing to worry about the SEC’s crackdown on staking. However, its USDC “rewards” program might suggest otherwise.
Coinbase USDC ‘Staking’ Program Raises Questions
In February, rival exchange Kraken settled a $30 million lawsuit against the SEC over crypto staking. The lawsuit also prohibited Kraken from offering staking products.
According to Armstrong, Coinbase is not at risk of a similar scenario. There are clear differences between Coinbase staking and Kraken, he said.
“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,” Armstrong said.
On its website, Coinbase says it offers two ways for users to earn rewards on their crypto; staking and DeFi yield. Its staking services are available to US customers and allow them to retain custody of their wallets.
Coinbase DeFi yield, on the other hand, relies on lending crypto to third-party DeFi protocols. Due to regulatory concerns, Coinbase’s DeFi yield is currently unavailable for US customers.
However, US customers (except those residing in Hawaii) can access its USDC rewards program. In particular, Coinbase advertises a 1.5% APY for all users holding at least $1 in USD.
In the interview, Conbase CEO said that he is “quite bullish” on USDC, whose issuer is Circle, a Coinbase partner.
These rewards are not staking rewards, as USDC is a stablecoin and does not have its own proof of stake network.
It is unclear how the SEC regards this product in particular. However, Coinbase’s CEO did reveal that the SEC sent investigative subpoenas for its staking, stablecoin, and yield-generating products.
Coinbase Has Good Relations With The SEC: Coinbase CEO
Despite regulatory pressure, Coinbase’s CEO said he has “no concerns” about the stablecoin sector, where USDC is a major player. He also expressed his confidence in Coinbase’s staking services.
“We are prepared to defend that in court if we need to,” Armstrong said about staking. “But we are never looking for a fight. We want to work collaboratively with regulators all over the world,” he added.
Armstrong claimed that Coinbase has a “good relationship” with various staff members and commissioners at the SEC. He also said that the exchange is happy to follow regulations to protect consumers.
“If clear rules are published, we are happy to follow them. And if the rules change, we are happy to follow those. We want to bring this industry within the regulatory parameters so that we have good consumer protection. But, we also want to preserve the innovation potential,” Armstrong said.
Coinbase’s CEO also revealed he met with SEC Chief Gary Gensler several times. However, he did not reveal how these meetings went.
On the Flipside
- SEC Chair Gary Gensler also met with Sam Bankman-Fried before the FTX bankruptcy.
- Brian Armstrong emphasized that Coinbase is a US company. He appealed to regulators by saying that critical innovation should remain in the country.
Why You Should Care
SEC regulation could have a profound effect on Coinbase’s business, its shareholders, and its users.
Read about Coinbase’s partner Circle calling out the SEC:
USDC Issuer Circle Says SEC Is the Reason for Failed $9B Plans to Go Public
Read more about the SEC’s staking crackdown:
Why the SEC’s ‘Staking Ban’ Is Not What You Think