The stock of leading U.S. cryptocurrency exchange Coinbase (COIN) suffered its biggest daily loss in seven months after the country’s Securities and Exchange Commission (SEC) forced rival exchange Kraken to shut down its crypto staking services in a $30 million settlement deal. This caused COIN to close at $59.63 on Thursday from the day’s starting price of $68.51, signaling a 14.13% plunge. Coinbase generates significant revenue from its crypto staking services, and the SEC is allegedly cracking down on such services.
Kraken agreed to pay $30 million in disgorgement and civil penalties and discontinue its staking platform after months of regulatory probes over unregistered securities offered as staking services. Coinbase CEO Brian Armstrong shared an update on rumors about the SEC stopping crypto staking for retail U.S. users, arguing that staking should not be classified as a security. Coinbase is the second-largest depositor of Ether (ETH) after liquid staking protocol Lido, followed by Kraken and Binance.
Staking revenue accounted for 11% of net revenue in Q3 2022 for Coinbase, an increase from 8.5% in the previous quarter. The SEC’s actions might mean trouble for the exchange, as the prices of crypto assets are still struggling to recover from the 2022 winter. Coinbase’s chief legal officer Paul Grewal believes the SEC’s ruling does not apply to the exchange’s staking program, arguing that Coinbase’s staking services are fundamentally different and are not securities.
The SEC’s decision to crack down on crypto staking services has had a major impact on Coinbase’s stock, and it remains to be seen how the exchange will be affected by the ruling. Coinbase’s staking services are a major source of revenue, and the exchange will need to find other ways to make up for the lost income. It is also unclear how the SEC’s ruling will affect other crypto exchanges that offer staking services.