The CEO of Coinbase, Brian Armstrong, has said that the exchange will shut down Ether staking if there is government censorship. Armstrong said he would not be p[art of censoring the Ethereum blockchain through the Coinbase Ethereum staking protocol.
Coinbase will shut down ETH staking to avoid censorship
Armstrong was responding to questions posed by an Ethereum developer who questioned the issue of centralization of staked Ether tokens. Data from Dune Analytics shows that 66% of the Ether tokens staked on Beacon Chain were held by institutions regulated by the Office of Foreign Assets Control (OFAC).
The developer concerned about the centralization of the staked Ether tokens asked the leaders of some of the leading staking platforms, such as Coinbase, on whether they would work together to censor transactions if OFAC mandates such an action.
Armstrong responded to the query, saying that if such a situation arose, the exchange would choose to shut down its staking service instead of complying with such requests. He said that the focus would be on the bigger picture.
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The Coinbase CEO also said that there could also be a third option involving a legal challenge that could allow the exchange to achieve a better result. However, he said that he was talking about a hypothetical situation and hoped it would not happen.
OFAC’s role in crypto regulations
OFAC recently imposed sanctions on the Tornado Cash crypto mixer. The sanctions have elicited mixed reactions from the crypto community, with some saying that the move showed that the regulatory body could also take a similar action against a network like Ethereum if they deemed it fit to do so.
Ethereum is transitioning to a proof-of-stake (PoS) network through the Merge, which is slated to happen in mid-September. Under the PoS system, those who hold the largest stake in the network have the greatest voting power. If entities with a large number of staked tokens choose to work together, they can willingly censor some transactions.
The Ethereum PoS network has already attracted much opposition. One Ethereum miner said that he would fork the Ethereum blockchain to retain the proof-of-work algorithm. The co-founder of Ethereum, Vitalik Buterin, also said that he would support hardforking the network if the staking providers implement a censorship attack using their veto power.
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