Coinbase, a prominent cryptocurrency exchange based in the United States, has made the decision to temporarily halt customers in four states from staking additional assets due to ongoing legal proceedings initiated by local regulators.
In a blog post published on July 14, Coinbase announced that users located in California, New Jersey, South Carolina, and Wisconsin would be restricted from utilizing specific staking services until further notice.
This move comes after the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against the exchange in June, alleging the offering of unregistered securities.
Consequently, regulatory bodies in ten states took their own legal actions, leading Coinbase to suspend certain services.
Coinbase expressed its disagreement with the accusation that their staking services are considered securities, stating, “We strongly disagree with any allegation that our staking services are securities.”
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However, the exchange emphasized its commitment to fully complying with the preliminary state orders, even before having an opportunity to defend itself.
According to Coinbase, the pause in staking additional assets is only applicable to the regulatory actions taken in California, New Jersey, South Carolina, and Wisconsin.
Users based in Alabama, Illinois, Kentucky, Maryland, Vermont, and Washington can continue to stake cryptocurrency as they did prior to the regulatory proceedings.
This announcement followed the first pre-motion hearing in the SEC’s case against Coinbase.
The commission filed the lawsuit on June 6, alleging that the exchange has been operating as an unregistered security broker since 2019. Coinbase has consistently denied these allegations.
In recent times, both state and federal regulators have targeted various cryptocurrency firms for their staking services, arguing that such services violate securities laws.
In February, Kraken, another prominent exchange, reached a $30-million settlement with the SEC, necessitating the cessation of staking services and programs for its U.S. clients.
Coinbase’s decision to temporarily halt staking services in certain states reflects the growing scrutiny and legal complexities surrounding the cryptocurrency industry.
As regulatory actions and lawsuits continue, exchanges are navigating the challenges posed by compliance requirements while striving to defend their business practices.
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