• Coinbase CEO Brian Armstrong says that they could shut down their staking services if there are regulatory threats.
• According to him, Coinbase values the integrity of the blockchain network.

The US Treasury Department recently launched an attack on Tornado Cash, an Ethereum coin mixing tool, banning American users from using the platform. According to reports, the Department took that action as it observed criminals launder money through the platform.

These actions have raised concerns among blockchain technologists who suspect that the post-merge Proof of Stake consensus mechanism and the Ethereum fundamental could be affected. There are concerns that any regulatory issues on Ethereum could force exchanges like Coinbase to distance themselves. 

On Twitter, Coinbase CEO Brian Armstrong answered a hypothetical scenario where regulators ask his company to censor at the Ethereum protocol level with their validators. He was asked whether the exchange would (A) comply and censor at the protocol level or (B), shut down the staking service and preserve its integrity. 

According to him, Coinbase values the integrity of the blockchain network. For this reason, his company would shut down any Ethereum staking service when there is any regulatory threat. 

It’s a hypothetical we hopefully won’t 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.

This is said to be an interesting question especially as the company has recently been focusing on its staking services which appear to be very lucrative. This has been confirmed by JP Morgan analysts who believe the Ethereum Merge could be bullish for Coinbase and its shares (COIN). 

Coinbase to add more assets for staking

Coinbase has assured that it would continue to add more assets for staking.

In early August, we began offering Ethereum staking for institutional clients for the first time. We’ll continue to add more assets for staking for both our retail and institutional clients going forward.

Armstrong was in strong disagreement with the sanctioning of Tornado Cash which he believes is a bad precedent. However, he admitted that they will always follow the law. 

Despite the revenue generated for large institutional players, analysts and investors are concerned that pressure from the government could push them away from providing staking services. When this happens, the entire network could be affected.

In a blog post published in February, Armstrong argued that decentralization is the ultimate for customer protection. Making a case for cryptos, he mentioned that their decentralized nature offers protection to customers. He also added that the decentralization of their products makes customer protection stronger. Without them, he stated that the Coinbase moderation policy could succumb to pressure.