Staking Ethereum is problematic, says Cardano CEO

The United States Securities and Exchange Commission (SEC) is rumored to be considering banning cryptocurrency staking services, according to experts, including Cardano founder Charles Hoskinson. According to Hoskinson, Ethereum, one of the most prominent protocols in the industry, has a complicated staking system.

According to Coinbase CEO Brian Armstrong, users’ staking rewards when they lock their cryptocurrency look more like dividends paid out to security token holders.

Hoskinson believes Ethereum tokens locked in staking smart contracts should be regulated because of their absolute inaccessibility.

“Ethereum staking is problematic. Temporarily giving up your assets to someone else to have them get a return looks a lot like regulated products. Slashing and bonds are not so good. Non-custodial liquid staking on the other hand is like the mining pools we’ve used for 13 years,” he said in a tweet reacting to Armstrong’s first post. Cardano’s boss says they approached the issue of staking on the protocol in a largely controlled way by the community.

A bad turn for the industry

While the news is still classified as a rumor, industry participants are clearly bracing for a market regulator ban. According to Hoskinson, the “fundamental misunderstanding about the actual facts of operation and design” will lead the SEC to classify all staking products as the same, regardless of their differences.

He believes that creating a centralized system rather than a decentralized one, as most staking protocols have done, will harm the industry. With the SEC empowered to regulate cryptocurrency in the absence of a regulatory change in the United States, the commission has brought numerous enforcement actions against a number of companies, including Ripple Labs Inc and LBRY.

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