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Will Stop ETH Staking on any Regulatory Issue: Coinbase CEO

The CEO of the crypto accounting firm Rotkiapp, who goes by the handle @LefterisJP, asked What exchanges would do if authorities asked them to censor Ethereum at the protocol level.

Photo by PiggyBank / Unsplash
Question for @LidoFinance, @coinbase, @krakenfx, @stakedus, @BitcoinSuisseAG

If regulators ask you to censor at the #ethereum protocol level with your validators will you:

A) Comply and censor at protocol level
B) Shut down the staking service and preserve network integrity 14, 2022

Brian Armstrong, CEO of Coinbase, responded to a hypothetical instance today on Twitter by saying that his organization will cease its Ethereum staking service in the event of regulatory issues to safeguard the integrity of the blockchain network.

It's a hypothetical we hopefully won't actually face. But if we did we'd go with B i think. Got to focus on the bigger picture. There may be some better option (C) or a legal challenge as well that could help reach a better outcome.August 17, 2022

The Ethereum blockchain will finally switch to a Proof of Stake (PoS) method in less than a month. This means that ETH will be staked rather than mined.

The modification tries to solve some of the primary issues afflicting the Ethereum network, including scalability and high transaction fees.

The question was raised on Sunday by Lefteris Karapetsas, the person behind Rotki, an open-source crypto analysis, and accountancy application. If political authorities demanded that they censor certain addresses, Karapetsas threw the gauntlet to numerous important Ethereum players, asking them to choose between two options.

He nonetheless added that there might be a legal path, in which case Coinbase will challenge the government and work to get a better outcome for all.

Troubles for Coinbase

Coinbase, a publicly traded corporation, was one of the first cryptocurrency businesses to debut on a stock exchange.

Coinbase has been experiencing issues recently due to the continuing bear market. Coinbase had to let go of a chunk of its workers to survive the bitcoin winter, much like many other cryptocurrency startups.

Armstrong’s remark is especially noteworthy because Coinbase heavily depends on its lucrative staking service and views it as a “big win” for the company. And only last week, JPMorgan analysts stated in a note that due to Coinbase’s Ethereum staking service, the company’s shares (COIN) could profit from the Ethereum merger.

What Vitalik thinks about Ethereum censorship

In a recent Twitter poll on Ethereum censorship, Vitalik Buterin, the co-founder of Ethereum, stated that he wants to punish validators for complying with the censoring requirements by burning their stake tokens.

The Ethereum community was tested by software programmer Eric Wall, who questioned whether they’d burn the staked tokens of validators following censorship directives or just “endure the censorship” and take no action.

fwiw I voted X in your above pollAugust 15, 2022

Sixty-two percent of voters, including Buterin, favored the former. Meanwhile, 29% of users clicked “show results,” and 9% of users decided to tolerate censorship.

Regarding a tweet from Lefteris Karapetsas asking five significant Proof-of-Stake validators if they would comply with censorship requests or respond by closing down their staking service, Wall developed a poll.

The cryptocurrency sector is having difficulty getting past worries about mixers like Tornado Cash and frequent hacking occurrences. Governments worldwide have tightened their sector oversight to protect their populations from financial hazards.

Authorities may become overly cautious about Merge’s release in this context, and cryptocurrency firms like Coinbase are already planning how to respond to various contingencies.