Brian Armstrong, CEO of publicly-traded cryptocurrency company Coinbase, has publicly shared rumors that the United States Securities and Exchange Commission (SEC) plans to ban cryptocurrency staking for retail investors.

Armstrong expressed a belief that any such move by the U.S. regulator would be a “terrible path” for innovators.

1/ We’re hearing rumors that the SEC would like to get rid of crypto staking in the U.S. for retail customers. I hope that’s not the case as I believe it would be a terrible path for the U.S. if that was allowed to happen.

— Brian Armstrong (@brian_armstrong) February 8, 2023

At this point, it is unclear why the U.S. SEC may be considering a ban on cryptocurrency staking for retail investors. However, early speculation is that the regulator may look to apply its controversial securities definition to staked crypto assets. The SEC has cited the rule as the basis for several enforcement actions against cryptocurrency projects that raised funds from U.S. investors and may be looking to broaden its scope in the coming months.

However, Brian Armstrong argues that staking is not security, labeling it a really important innovation in crypto. “It allows users to participate directly in running open crypto networks. Staking brings many positive improvements to the space, including scalability, increased security, and reduced carbon footprints,” the Coinbase CEO noted.

Meanwhile, Jake Chervinsky, Chief Policy Offer for the U.S. Blockchain Association, alluded to rumors of a possible ban on crypto staking for retail investors. However, he expressed confidence that U.S. “laws and courts won’t allow it.”

U.S. to Step up Crypto Regulation Following FTX debacle?

Rumors of a possible U.S. crypto ban on retail staking have come off the back of the collapse of the once-popular exchange platform. Investors reportedly lost billions of dollars through the FTX collapse, and regulators seem focused on avoiding a similar outcome.

A potential ban on retail cryptocurrency staking would make such products unavailable to everyday investors on U.S.-based exchanges such as Coinbase, Kraken, and Binance US. Yet, they may still be accessible to sophisticated and accredited investors.

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