What is cryptocurrency staking? The U.S. SEC wants to ban sta | Crypto Trading Signals✅
What is cryptocurrency staking?
The U.S. SEC wants to ban staking. Let's refresh our knowledge of this process and think about what the regulator can and cannot ban
Staking is an alternative to mining in cryptocurrencies on the Proof-of-Stake algorithm, where a certain number of coins are blocked in order to qualify to participate in transaction verification. As with mining, the blockchain relies on rewards in network tokens to keep it running
In POS cryptocurrencies, validators are responsible for verifying transactions and creating new blocks in the blockchain by placing their coins on the stack. These can be either the validator's own coins or funds received from other users.
For example, to create an Ethereum stack, a minimum of 32 ETH must be blocked. This amount may be too high or the user doesn't want to set up a node and check transactions, i.e. be a full-fledged validator. In that case, you can transfer your ETH to another validator, who will split the reward with you. And the transfer process itself can take place through an intermediary, such as a cryptocurrency exchange or DeFi service.
In this case, staking actually turns into a form of passive income, where you transfer cryptocurrency to a third party and get a percentage for it. It works just like a deposit in a bank
The SEC wants to ban staking because from their point of view it is an illegal financial service that no one has been licensed for. Banks have a license for deposits, but crypto exchanges don't have a license for staking
Based on this logic, the regulator could require all centralized crypto exchanges to stop providing staking services until such activities are legally regulated.
Banning staking on DeFi is much more difficult, but it is theoretically possible. The practice of regulating DEX exchanges exists and has been used. Authorities simply prosecute the developer of the DeFi protocol, and he either goes to jail or shuts down his service.
But what the regulator can't prohibit is to engage in cryptocurrency stacking themselves, directly interacting with the blockchain.
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