Shares of leading U.S. cryptocurrency exchange Coinbase ( COIN ) suffered their biggest daily losses in seven months after the country's Securities and Exchange Commission (SEC) forced rival exchange Kraken to shut down its cryptocurrency staking services as part of a $30 million settlement agreement.
The decline in the value of COIN can be attributed to the fact that Coinbase generates significant revenue from its crypto-staking services and the SEC is allegedly cracking down on such services.
COIN is down more than 14%
COIN closed at $59.63 on Thursday from the day's opening price of $68.51 and is trading at $58.99 at the time of writing, representing a 14.13% drop.
The last time the stock suffered such a large intraday loss was in July when Coinbase faced an SEC investigation into its cryptocurrency offering. The regulator was investigating whether the exchange allowed US customers to trade crypto tokens that should have been registered as securities.
SEC Pursues Crypto Staking Service Providers
To recall, Kraken settled yesterday with the SEC after months of regulatory scrutiny over unregistered securities offered as betting services. The exchange agreed to pay $30 million in restitution and civil penalties and to shut down its betting platform.
The development comes just a day after Coinbase CEO Brian Armstrong shared an update on rumors that the SEC is ending betting on cryptocurrency for retail users in the US. The CEO argued that staking should not be classified as a security, citing a Paradigm article on Ethereum's new staking model.
Notably, Coinbase is the second largest depositor of Ether (ETH) after the liquid staking protocol Lido, followed by Kraken and Binance.
For Coinbase, staking revenue was 11% of net revenue in Q3 2022, up from 8.5% in the previous quarter. The SEC action could spell trouble for the exchange as crypto asset prices are still trying to recover from the winter of 2022.
Grewal: Coinbase's staking services are different
Meanwhile, Coinbase Chief Legal Officer Paul Grewal believes that the SEC decision does not apply to the exchange's staking program.
Commenting on the Kraken vs. SEC saga, Grewal said:
“Coinbase's staking program has not been affected by today's news. Today's announcement made it clear that Kraken was offering a profitable product. Coinbase staking services are fundamentally different and are not securities.”
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