Coinbase, a prominent cryptocurrency exchange, announced in a blog post that it restricts retail staking for customers in California, New Jersey, South Carolina, and Wisconsin to be unable to pledge new cryptocurrency to the exchange’s staking program.
This decision comes as a result of legal proceedings initiated by these states in June, challenging the legality of Coinbase’s staking service.
Coinbase’s staking program allows users to lock up their cryptocurrencies for a specified period in exchange for earning yield or rewards. However, ten states, including California, New Jersey, South Carolina, and Wisconsin, accused Coinbase of violating state securities laws through this program.
While the legal proceedings are ongoing, Coinbase restricts staking new cryptocurrency pledges from retail customers residing in these states. However, any cryptocurrencies that were staked by users in these states before the orders were issued on June 6 are not affected by this restriction.
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The states’ accusations likely revolve around concerns that Coinbase’s staking program could be classified as a security offering, subject to regulations designed to protect investors. By participating in the program, users essentially lock up their assets and expect to receive a return, which some states argue falls under the definition of a security.
To ensure compliance with the ongoing legal proceedings, Coinbase has taken this precautionary measure of temporarily halting new cryptocurrency pledges from affected states. It allows Coinbase to avoid potential legal consequences while the regulatory issues are resolved.
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It is worth noting that this restriction only applies to retail customers in the mentioned states. It does not impact users from other regions or institutional clients who utilize Coinbase’s staking program.
As the legal proceedings unfold, Coinbase will likely continue to cooperate with the states involved and work towards resolving the concerns raised by the regulators. The outcome of these proceedings will have implications not only for Coinbase but also for the broader cryptocurrency industry, as it could potentially set precedents regarding the regulatory treatment of staking programs and other similar cryptocurrency services.
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