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One of the oldest crypto exchanges Bitstamp announced that it would discontinue ETH staking services for US customers starting September next month. The development comes amid the crackdown by the US Securities and Exchange Commission (SEC).
Crypto staking refers to the practice of earning rewards by committing tokens to support the operation of a blockchain. Ethereum started offering ETH staking in December 2020, much before the blockchain transitioned to a Proof-of-Stake (PoS) network. However, the SEC considers certain products related to staking as unregistered securities.
Bobby Zagotta, CEO of Bitstamp US, mentioned that customers will continue to receive staking rewards until September 25, 2023. After this date, all staked assets will be unstaked, and both rewards and principal will be added to users’ primary Bitstamp account balances. The usual duration for this procedure is a few days, though it might be extended based on network circumstances.
The company is closing its staking features because of the regulations in the US. Zagotta said that Bitstamp is a highly regulated and reliable exchange. They have a system in place to regularly check the services they offer and consider the changing rules in all the places they work.
“Considering current regulatory dynamics in the US, we’ve made the decision to discontinue staking for customers residing in the United States,” said Zagotta.
SEC Crackdown on Bitstamp and Crypto Staking
The US Securities and Exchange Commission has taken legal action against staking service providers in several cases. In lawsuits against both Coinbase and Binance, it argued that the staking programs can be considered investment contracts according to the Howey test.
In June, the agency filed a lawsuit against Coinbase Global Inc., alleging that the company violated its regulations by providing staking services. Crypto exchange Kraken previously halted its staking offerings in the US after announcing a $30 million settlement with the SEC to resolve similar allegations.
Earlier this month, Bitstamp announced a new fundraise with the goal of expanding its derivatives trading services in global markets.
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