Coinbase CEO Armstrong Decries Rumors of Possible US SEC Ban on Crypto Staking (bloomberg.com) 44
Coinbase's head Brian Armstrong escalated his war of words with the US Securities and Exchange Commission, warning he'd heard rumors the agency wants to "get rid of" crypto staking by retail investors. Bloomberg: "I hope that's not the case as I believe it would be a terrible path for the U.S. if that was allowed to happen," he tweeted on Wednesday, while arguing that the practice of staking is "a really important innovation." The SEC declined to comment on Armstrong's tweets. The agency has repeatedly said that most digital tokens are securities that should be subject to its rules. Chair Gary Gensler has previously indicated staking could fall under the regulator's purview. Armstrong argued that staking is not a security.
Staking involves earning rewards by locking up coins to help order transactions on various blockchains such as Ethereum. Coinbase, Kraken and other crypto exchanges have waded into staking products to diversify revenues. The firms let users stake coins, without needing specialist computer equipment nor having a minimum amount of 32 Ether, and take a cut of the rewards. Staking on Ethereum can earn yields of about 6%. Coinbase has flagged the progress of its staking services to shareholders.
Staking involves earning rewards by locking up coins to help order transactions on various blockchains such as Ethereum. Coinbase, Kraken and other crypto exchanges have waded into staking products to diversify revenues. The firms let users stake coins, without needing specialist computer equipment nor having a minimum amount of 32 Ether, and take a cut of the rewards. Staking on Ethereum can earn yields of about 6%. Coinbase has flagged the progress of its staking services to shareholders.
Re: SEC won't ban it (Score:1)
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Is this just another name for an IOU?
-Oh and fix your character set when posting to Slashdot, it's not like this is the 21st century...
Re: SEC won't ban it (Score:2)
Think about it like a bank with multiple accounts. One account might be used for active spending, while another might be invested in a CD. It's all still your money. Some of it's just tied up for a bit.
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An exchange is not a bank, so comparing the two is silly.
Re: SEC won't ban it (Score:2)
But that post was talking about custodial vs non-custodial. The terminology of wallets vs accounts vs addresses vs persons confuses the issue, because wallets don't map to bank accounts. But ultimately you can stake while retaining control, which means it's non-custodial, regardless of if it stays in some specific wallet.
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I loan money to the bank, they give me a CD (Score:1)
I give money to the bank, they give me a Certificate of Deposit. The money isn't in my account, I have a document that says I loaned the bank money.
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Depending on the crypto, you are absolutely right that there is inflation due to more coins being minted. Those APYs are also generally an average, you don't get a set percentage every staking period, it depends on the # of transactions processed on the chain.
This is why for example all those random coins on PancakeSwap are such a bad idea. I wouldn't say they are outright scams, but even paying a >10% APY for a short time as a teaser is a sign that there is huge inflation risk to any investment there.
So
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because that's the only (currently) viable consensus mechanism that doesn't have disastrous ecological implications.
Isn't this point debatable? I thought BTC PoW in large part uses electricity that would've burned off the grid running at full load anyway...
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Any point is debatable, but BTC uses a lot of power that power could be used for other purposes, as long as its profitable miners will mine. You could also argue that for any large scale electricity usage, Electric Cars are charged at night so they use excess energy but in the end the electrical capacity has to be increased or not decreased by shutting down more polluting sources.
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but in the end the electrical capacity has to be increased or not decreased by shutting down more polluting sources.
But that's the point, I'm not sure if electricity generation changes much with or without BTC, as power plants rarely/never reduce their production.
Re: SEC won't ban it (Score:1)
Re: SEC won't ban it (Score:2, Funny)
I still love crypto but the US is killing it one law at a time... A bit like a boiling frog.
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Not a problem. You are on your own. When the rug gets pulled out from under you don't go running to the government thinking they'll help you get your money back.
Fair enough?
Re: From the post-looks like staking is an investm (Score:2)
It seems more like a bank savings account or CD. You retain control over the staked coins; you don't send them to anyone. The original coins never disappear (you can't lose). You just collect interest payments for sitting on the coins.
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Even though I'm always cynical about cryptocurrency, how is this different from a stock dividend, fundamentally? To me, staking is quite similar to just holding stock and letting a dividend come in, perhaps using it to buy more stock via a DRIP.
It may even make cryptocurrency a mainstream investment if staking a currency can mean a consistent rate of return, although a lot of wallets don't support this.
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That's the entire point the SEC is making: these are securities and shall be regulated as such.
Where does the money come from? (Score:3, Interesting)
One thing that Armstrong and his other cronies in the crypto 'industry' won't tell you is where the staking rewards come from. My guess it relies on new investors and their money to pay off earlier investors. I think there is a name for that, Fonzie dream or something?
FFS, it's common knowledge (Score:3)
*Facepalm*. This is yet another example of why this site is utter trash when it comes to crypto. How staking works is WIDELY KNOWN.
Those rewards come from validator nodes on Proof of Stake protocols handing back a percentage of their fees back to people who have staked coins with them.
The more coins staked with a particular validator, the more weight it has on validating network oper
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The amount of money processed in day-to-day transactions has to be much higher than the the amount of money that is staked. If everyone stakes and no one transacts then the yield is zero.
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the base fee of transactions must be absurdly high.
Yes. This is also something WIDELY KNOWN. We've even covered the absurdly high gas fees here on Slashdot.
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Re: Where does the money come from? (Score:1)
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One thing that Armstrong and his other cronies in the crypto 'industry' won't tell you is where the staking rewards come from.
Staking is an alternative scheme to mining. The new coins literally appear out of thin air, which means when you stake you're essentially being paid in inflation. Now if you're dealing with a cryptocurrency that is "mined out" (meaning the algorithm has hit its predetermined coin limit and no new coins are being produced), you'd be staking for a percentage of transaction fees.
In either case, you're not earning real money, you're earning cryptocurrency. It's entirely up to the free hand of the market whet
The law says it must be banned due to chargebacks. (Score:4, Insightful)
As much as people who support cryptocurrency don't want to hear this, the fact that Crypto currency cannot force a chargeback is the core issue that is making these regulators not trust.
A system that a customer cannot get help with when they have been scammed is not a secure system, and is not a system that can be considered trustworthy.
Electronic cryptocurrencies are not built to be secure or compliant with current finance law due to this gap.
As a result, it will be banned, and it will be regulated out of existence, because it has been designed from the ground up to not respect the current financial laws that mandate that chargebacks must be a part of the system, so it is illegal by default.
The current finance system doesn't require this... (Score:4, Interesting)
If you send $5k via MoneyGram or Western Union to a scammer, there is absolutely no requirement under law that those vendors get your money back.
If you send $5k to someone by check or wire transfer and decide they're a scammer, you have no legal right to just pull a PayPal style "freeze and clawback their funds" without some intervention by law enforcement or a judge.
The financial system is a multi-layered system with a whole lot of inconsistent regulation. What is true of credit cards is not true of many forms of banking or money transfers.
So no, it will not be banned for this because it is not a credit card-adjacent system. It bears more in common with MoneyGram than Mastercard.
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Straight from the MoneyGram web site:
What can I do if the person to whom I sent a money transfer and I are the victims of fraud?
You may use the contact form on this site to report fraudulent activity by selecting Report Fraud from the Type of Request drop down*. Please provide details of the incident in the Comments field.
*If you suspect fraud on a transaction that has not yet been received, please contact our Customer Care Center at 1-800-926-9400 in order to have the transaction cancelled immediately
https [moneygram.com]
That doesn't mean what you think it does (Score:2)
What's your point? I skimmed over that whole section. Did not see one line saying they were going to make you whole rather than work with law enforcement to get the person who defrauded you.
IRL someone with your account and routing numbers can just start drafting money from your accounts, and t
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You think sending a letter is the same thing as a chargeback? Do you not understand what is being talked about here?
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There are lots of reasons that one might want to rollback a transaction. I gave one example of how crypto fails in that regard.
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Re: The law says it must be banned due to chargeba (Score:1)
This isn't about using Crypto as currency (Score:4, Informative)
SEC isn't looking to ban it, per the article, they're going to stop retail investors from buying in because it's an ultra high risk investment and retail investors are generally not able to absorb those losses.
Of course these are scams, and so they rely almost entirely on retail investors to make their money. They're generally structured so that big institutional investors can get out, usually by requiring stakes to be withdrawn as USD/Cash in increments of $100k and everything else to be sold on an exchange if you want your money out. These scams draw big investors who understand that it's the little guys who get caught holding the bag during the inevitable collapse. Take those little guys out and the only bag holders are the big guys, and they know that and won't buy in.
Basically, SEC is talking about limiting access to high risk securities to people who can afford to take the risk, which is normal and done every day. It's not a ban, but applying this basic regulation to crypto would kill it dead and Coinbase knows it.
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the fact that Crypto currency cannot force a chargeback is the core issue that is making these regulators not trust.
Errr no. Chargebacks are not a thing either mandated nor possible with the overwhelming majority of our financial transaction systems. Most ways of transferring money do not provide any chargeback mechanism, nor is there any requirement for it.
In fact Credit Cards are almost complete outliers in this regards.
let's create money (Score:2)
Does it fail Howey test? (Score:1)
Re: Does it fail Howey test? (Score:1)
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