Coinbase will close Ethereum Staking if it faces regulatory pressure

The CEO of Coinbase, Brian Armstrong, declared on Thursday that despite his company’s substantial stake in the Ethereum protocol, he would not censor the blockchain. He would rather shut down the service if required to by the government, he added.

In answer to a query from an Ethereum developer about the centralization of staked ETH, Armstrong made his plans clear. According to Dune Analytics, the Office of Foreign Assets Control (OFAC) regulates 66% of the ETH staked on the beacon chain.

As a result, the developer questioned whether some of the bigger stakeholder companies, such as Coinbase, would join together to censor transactions if required to do so by the OFAC. In response, Armstrong said he believes Coinbase, which is currently facing major regulatory probing, would choose to shut down its staking business rather than rigorously comply if forced in that situation.

“Got to focus on the bigger picture. There may be some better option or a legal challenge as well that could help reach a better outcome.”

Notably, as TheCoinRise reported, the Ethereum-based privacy protocol Tornado Cash was sanctioned by OFAC a few days back. This has sparked concerns that, if they have the power to do so, they could be willing to censor Ethereum at the protocol level.

Ethereum’s upcoming major event

Vitalik Buterin, a co-founder of Ethereum, has stated that in the event of a censoring attempt, he would favor hard-forking the Ethereum blockchain and reducing the shares of staking providers. Notably, ETH will shift its consensus from Proof-of-work to Proof-of-stake via the event called “The Merge” in September 2022.

The proof of stake approach gives people with a sizable stake in the network a larger voting part in deciding the ledger’s current state. Entities can censor transactions at will if they gather together and have a net stake above a specific threshold.