Coinbase Drops Its Staking Program Order From South Carolina Attorney General

S.C. Attorney General Alan Wilson has dropped an order that barred Coinbase — the largest U.S. cryptocurrency platform — from operating a program in the state

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A new cryptocurrency order from South Carolina Attorney General Alan Wilson’s office has been dismissed.

The 2023 order, which was written by a deputy attorney general in the attorney general’s division of securities, had halted cryptocurrency exchange Coinbase from operating its “staking rewards” program in the state.

But after administrative actions, the order was dismissed March 27, according to a copy of the dismissal obtained by The Post and Courier.

The order, first reported by The Block, said the program wasn’t federally insured. That left more than 43,000 South Carolina accounts exposed to losses if the company experienced technical issues or failed to safeguard customer assets, the order said.

Coinbase said no user has ever lost assets through its services. And the company estimates the order has cost South Carolinians at least $2 million in missed earnings through the program.

In a statement, Coinbase Chief Legal Officer Paul Grewal called the dismissal a “huge win for consumer protection and financial opportunity.”

“Staking represents the best of what crypto has to offer — open, accessible economic opportunity for anyone who wants to participate,” Grewal said. “Crypto is bipartisan, it’s good policy and it’s here to stay.”

Still, the attorney general’s office noted in its dismissal that the action “does not necessarily reflect the division’s position on the merits of this matter” or its “position on any other case.”

The decision also comes after the SEC and Coinbase agreed last month to dismiss a broader federal case.

That case, which was filed in March 2023, accused Coinbase of illegally selling cryptocurrency securities to the public through its exchange and failing to register with the SEC.

Coinbase applied to register with the SEC in 2022 but was never granted the opportunity to do so, the company said.

The agency is charged with policing Wall Street and capital markets. It can impose hefty penalties for violations of federal securities law. Such offenses can be detected through routine examinations or tips from members of the public.

The agency’s role has expanded in recent years to include emerging technologies like crypto.

The Coinbase logo covers the Nasdaq MarketSite in New York's Times Square, April 14, 2021. (Photo by Mark Lenhard/dpa via AP)

Coinbase is the largest U.S. cryptocurrency platform. It allows investors to buy, sell and trade cryptocurrencies, such as Bitcoin and Ethereum.

Coinbase also offers a staking program, which allows investors to deposit cryptocurrency with the company in exchange for potential profit. In its 2023 lawsuit, the SEC said Coinbase failed to register as a national securities exchange, a broker or a clearing agency.

By failing to register, Coinbase denied investors protections like inspections, recordkeeping and safeguards against conflicts between the company’s interests and those of its customers, the SEC said in a statement announcing the suit earlier this year.

The agency’s complaint also said Coinbase should have realized its actions would come with scrutiny from the SEC.

But the SEC’s case was met with administrative difficulties.

After the administrative law judge assigned to the case recused himself in December, the agency moved to administratively close the case.

The SEC said it would pursue a new administrative case if it decided to continue handling the matter in-house. Otherwise, the agency said it would pursue the matter in federal court.

Coinbase said it was grateful for the administrative law judge’s service and looked forward to the next chapter in its journey.

The agency’s case against Coinbase was part of a broader crackdown on the cryptocurrency industry.

In June 2023, the SEC sued another cryptocurrency giant, Binance, for allegedly defrauding investors and illegally operating a securities exchange.

The agency is also investigating other cryptocurrency companies and platforms.