(Bloomberg) -- Brian Armstrong, co-founder and chief executive officer of Coinbase Global Inc., reiterated that the largest US cryptocurrency exchange’s “staking” product shouldn’t be classified as a security amid a broad regulatory crackdown. 

“Our staking product is not a security,” Armstrong said during a Bloomberg Television interview on Wednesday. “Customers never turn their assets to Coinbase for instance. And we really just are providing a service that passes through those coins to help them participate in staking, which is a decentralized protocol.” 

Staking works by letting users generate yields in return for allowing their tokens to be used to facilitate transactions on a blockchain. 

Armstrong has disagreed with US Securities and Exchange Commission Chairman Gary Gensler in the past, and the company said recently that it may not remove a particular crypto asset even if the SEC alleges that it is a security, pending a final judicial determination. Coinbase has said it has received investigative subpoenas from the SEC about staking, stablecoin and yield-generating products. 

In regard to the staking product, “we are prepared to defend that in court if we need to,” Armstrong said. “But we are never looking for a fight. We want to work collaboratively with regulators all over the world.”

Last month, rival exchange Kraken entered in to a settlement with the SEC to close its US staking business, where customers earned yields on tokens. Under pressure from New York regulators, Paxos Trust Co. stopped issuing a Binance-branded USD stablecoin. The SEC also floated a proposal that would toughen regulation of crypto custody. 

Armstrong also said he does not “have concerns” over the broader stablecoin sector in digital assets, despite what happened with Paxos, adding that he’s “quite bullish” on USD Coin, which is also a dollar-pegged stablecoin issued by Circle.

Coinbase has been introducing new products and services to lessen its dependence on retail-driven trading revenue, which often mirrors the wide swings in the prices of cryptocurrencies. The firm has lost money the last four quarters. Coinbase launched a blockchain last week, expanding the exchange’s reach deeper into the worlds of decentralized finance and nonfungible tokens. 

Coinbase posted a $557 million loss and saw revenue tumble 75% in the fourth quarter as trading volumes plunged amid a series of prominent industry bankruptcies and scandals. 

Shares of Coinbase have jumped more than 80% to around $64 this year, after tumbling 86% in 2022. The shares traded at more than $400 when the company was first listed on the Nasdaq Stock Market in April 2021.


--With assistance from Yueqi Yang.

(Adds more information on staking, beginning in the third paragraph.)

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