Coinbase Suspends Algorand Staking Rewards Amid SEC Crackdown

Coinbase has recently been served a Wells notice by the SEC.

A shirtless man falling down to press the red button.
  • Coinbase has made a rapid decision to halt offering Algorand staking rewards.
  • The exchange has not given a reason for its action, but Algorand’s CEO has offered an explanation.
  • Coinbase is under increased pressure from the SEC, especially regarding its staking services.

Crypto staking rewards are becoming a controversial topic, especially in the U.S. The Securities and Exchange Commission (SEC) has clamped down on Kraken for its staking services, and now other exchanges are looking to be proactive to avoid the regulator’s ire. 

On Wednesday, March 22, Coinbase announced it would no longer offer Algorand token rewards as of Match 29th. While there is no direct explanation for the decision from Coinbase, it appears that regulatory scrutiny is at the heart of the matter.

A message to users read: “Beginning March 29th, Coinbase will no longer offer rewards on Algorand (ALGO). No action is needed from you, and ALGO is still available for trading….”

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In the aftermath of this announcement, Algorand Foundation’s CEO Staci Warden tweeted that the move was in light of regulatory scrutiny. 

"They've [Coinbase] now informed us that they are evaluating their services in light of recent regulatory scrutiny, and, for that reason, they will no longer support Algo rewards for retail customers," she said.

Coinbase in the Firing Line

Regulators, notably the SEC, have recently focused on staking rewards. Kraken was forced to shut down its staking operations and pay a $30 million fine, prompting Coinbase to react and claim its services do not violate staking laws. 

Coinbase has tried to be proactive and outline further reasons why its staking services should not fall under the jurisdiction of the SEC in a recently sent petition. However, this petition appears to have fallen on deaf ears as the SEC has served Coinbase a Wells notice

On Wednesday, March 22, the SEC alleged that Coinbase might violate securities laws while running its exchange and staking services. Just as with Kraken, the SEC made its intentions to prosecute clear through the Wells. 

Interestingly, the SEC did not outline details in its threat to prosecute. Coinbase is still in the dark about which coins are being seen as securities. As such, the exchange continues to offer staking rewards from the Ethereum, Cosmos, Tezos, Cardano, and Solana blockchains while removing Algorand.

On the Flipside

  • The Howey Test has long been the standard for determining if an asset is a security. However, the Securities Act of 1933 defines a security with a wide-ranging scope. This offers the SEC more jurisdiction and the potential to police crypto tokens and services.

Why You Should Care

Without clear legislation, those operating in the crypto sector will be at the whims of regulators utilizing a broad interpretation of current laws to police digital assets. Algorand has caught the brunt of it here, but it is still unclear if the SEC is focused on this aspect of Coinbase’s offerings. 

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
Darryn Pollock

Darryn Pollock is a South African-born, UK-based journalist and content writer for DailyCoin with a focus on regulation and legislation revolving around the cryptocurrency space. He has covered the evolving crypto regulatory space, and examined how the US has approached law-making to offer protection in the growth of innovation. Darryn values traditional journalistic principles of truth, accuracy, independence, fairness, and impartiality, and has a Bachelor of Arts degree in Journalism and Law from Rhodes University in South Africa.

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