The stock of leading US cryptocurrency exchange Coinbase (COIN) has 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.
The decline in COIN’s value can be attributed to the fact that Coinbase generates significant revenue from its crypto staking services, and the SEC is allegedly cracking down on such services.
COIN Plunges More Than 14%
COIN closed at $59.63 on Thursday from the day’s starting price of $68.51 and is trading at $58.99 at the time of writing, signaling a 14.13% plunge.
The last time the stock suffered such a big loss on a trading day was in July, when Coinbase faced a probe from the SEC over its cryptocurrency listings. The regulator examined whether the exchange allowed US customers to trade crypto tokens that should have been registered as securities.
SEC Goes After Crypto Staking Service Providers
Recall that Kraken reached a settlement deal with the SEC yesterday after months of regulatory probes over unregistered securities offered as staking services. The exchange agreed to pay $30 million in disgorgement and civil penalties and discontinue its staking platform.
The development came barely a day after Coinbase CEO Brian Armstrong shared an update on rumors about the SEC stopping crypto staking for retail US users. The CEO argued that staking should not be classified as a security, citing a Paradigm article on Ethereum’s new staking model.
Notably, Coinbase is the second largest depositor for Ether (ETH) after liquid staking protocol Lido, followed by Kraken and Binance.
For Coinbase, staking revenue accounted for 11% of net revenue in Q3 2022, 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.
Grewal: Coinbase’s Staking Services are Different
Meanwhile, Coinbase’s chief legal officer Paul Grewal believes the SEC’s ruling does not apply to the exchange’s staking program.
Commenting on the Kraken vs. SEC saga, Grewal said:
“Coinbase’s staking program is not affected by today’s news. What’s clear from today’s announcement is that Kraken was essentially offering a yield product. Coinbase’s staking services are fundamentally different and are not securities.”