Coinbase CEO Would Shutdown ETH Staking Service if Asked to Bend to Regulators

Brian Armstrong – CEO of Coinbase – stated on Thursday that he would refuse to censor the Ethereum blockchain using his platform’s concentrated stake in the protocol. 

If compelled by the government to do so, he’d rather shut down the service.

• Armstrong made his intentions clear in response to an Ethereum developer’s question concerning the centralization of staked ETH. According to Dune Analytics, 66% of ETH staked on the beacon chain is held by entities that are regulated by the Office of Foreign Assets Control (OFAC).
• As such, the developer asked the leaders of some of the larger staking entities – including Coinbase – whether they’d collude to censor transactions if compelled to do so by the OFAC.
• Armstrong answered that if Coinbase were put in that position, he thinks they’d opt to shut down their staking service, rather than outright comply.
• “Got to focus on the bigger picture,” he said. “There may be some better option (C) or a legal challenge as well that could help reach a better outcome.”
• “It’s a hypothetical we hopefully won’t actually face,” he added.
• The OFAC sanctioned the Ethereum-based privacy protocol Tornado Cash last week. This has aroused worries that they may be willing to censor Ethereum at a protocol level if it is in their power to do so.
• Under the proof of stake system, those who hold a large stake in the network have a greater voting share in determining the state of the ledger. If entities with a net stake beyond a certain threshold conspire, they can censor transactions at will.
• Ethereum currently uses proof of work, but plans to transition to proof of stake in mid-September.
• Ethereum co-founder Vitalik Buterin has confirmed that he would support hard-forking the Ethereum. blockchain and slashing the holdings of staking providers if they enacted a censorship attack.

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