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Cardano (ADA) Founder Slams SEC’s “One-Size-Fits-All” Staking Regulation

Published 02/10/2023, 02:45 PM
Updated 02/10/2023, 04:00 PM
Cardano (ADA) Founder Slams SEC’s “One-Size-Fits-All” Staking Regulation
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  • The SEC might impose regulations on cryptocurrency staking services in the U.S.
  • Charles Hoskinson has shared his view on the possible crypto staking regulations.
  • Hoskinson has opined that it is an “inconvenience to the industry as a whole” when nuanced staking models are placed under the same umbrella.

The U.S. Securities and Exchange Commission (SEC) has been on a regulatory spree as of late, raising alarm bells across the crypto community.

Recently, the possibility of a ban on crypto staking in the U.S. has been imparted by Coinbase (NASDAQ:COIN) CEO Brian Armstrong, saying regulation on crypto staking would be a “terrible path for the U.S.”

As a second part of his heated reply to this conversation, IOG and Cardano founder Charles Hoskinson shared a video discussing the possible staking regulations in the U.S., which has been a hot topic on Crypto Twitter this week.

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The video is part of an extended response from Hoskinson with respect to the conversation around staking differences between models like Ethereum and Cardano. Hoskinson opines that it is an “inconvenience to the industry as a whole” when regulatory bodies try to apply “one-size-fits-all” interpretations to the nuances of staking mechanisms like that of Cardano versus Ethereum.

Not Cut from the Same Cloth

Hoskinson mentions that some of the many differences in modes of operation between Proof of Stake models include liquid or illiquid staking, custodial or non-custodial staking, and the presence or absence of bonding and slashing mechanisms.

The Cardano founder suggests that some staking models present a custodial risk, potential information asymmetries, and the risk of returns, dependent on the efforts of a possible “regulated actor” that needs to access funds on behalf of the staker in order to generate a return.

Consequently, Hoskinson has shared that he is not wholly inclined to the idea of “exchanges getting out of the staking business,” as he would like stake pool operators and staking to be “distributed and decentralized” to mitigate the risk factor for U.S. and global stakers.

The Good News?

According to the Cardano founder, there are other ecosystems that have “more sensible consensus models,” which he believes could litigate strongly against the regulations and put up a good fight against potential one-size-fits-all SEC regulation.

In terms of Cardano, Hoskinson has declared that the ecosystem could work proactively with “arcane legal structures that could be put together to syndicate regulatory oversight if and when that comes to the staking pool model.”

Furthermore, Hoskinson opines that centralized regulatory concerns could possibly blow over with the U.S. changing to another political party with a more reasonable approach to the “status of cryptocurrencies in the United States.”

On the Flipside

  • U.S.-based cryptocurrency exchange Kraken has been hit with a hefty fine in penalties and agreed to shut down its crypto staking program as part of the settlement with the SEC for offering unregistered securities.
  • Litigation between the SEC and Ripple Inc. has been in action for years, perhaps hinting that a similar fate could be awaiting exchanges regarding staking regulation.

Why You Should Care

Despite the fact that a ban on cryptocurrency staking in the U.S. could significantly impact crypto exchanges, consensus should first be reached around regulating exchanges according to their distinct nuances in operation and design.

Read more about the possible ban of cryptocurrency staking in the U.S.:

SEC Tightens Enforcement, Probes Kraken for Violation of Securities Laws

Read more about Coinbase CEO’s opinion about the possible ban:

Coinbase CEO Brain Armstrong Says SEC’s Ban on Crypto Staking “Would Be a Terrible Path for the U.S.”

See original on DailyCoin

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