Some upset cryptocurrency holders think the censorship sets a bad precedent, but Coinbase seeks to comply with any orders from regulators. Some concerns about the centralization of Lido Finance have arisen, while four centralized cloud service providers control Ethereum nodes.
Some crypto community members criticize Coinbase for censoring the smart contract for its Wrapped Staked ETH (cbETH).
The Coinbase smart contract shows that the Wrapped Stake ETH has a blacklist feature. That allows the centralized cryptocurrency exchange to censor some addresses it deems necessary. The exchange censors wallets that violate user agreements and can freeze their funds.
Other cryptocurrency companies like peer-to-peer payments technology company Circle censor some addresses. The issuer of USD Coin (USDC) has frozen funds related to the Tornado Cash mixing service. The company blocked 75,000 USDC held by users linked with the Ethereum mixing platform.
Some cryptocurrency holders that believe the censorship sets a bad precedent will feel upset with the measure. Meanwhile, Coinbase has sought to work with the authorities to comply with any orders from regulators.
It Is the First Time CEO Armstrong Has Suggested Censorship
Some cryptocurrency community members have referred to previous comments by Brian Armstrong, the CEO of Coinbase. In August 2022, he said they could shut down the staking service instead of censoring it if regulators requested it.
The executive said that the cryptocurrency exchange would address that hypothesis but also noted that a better alternative would produce a more favorable outcome. He pointed out that he had to focus on the whole picture as there may even be a legal challenge.
The Cryptocurrency Community Thinks the Ethereum Staking Needs More Decentralization
Coinbase will become one of the most prominent participants on the Ethereum network, along with Kraken and Binance. The three cryptocurrency companies account for almost 30% of all ETH stakes, with 15%, 8.5%, and 6.75%, respectively.
Some concerns about the centralization of Lido Finance have arisen since it needs more decentralization as one of the main staked ETH parties. Meanwhile, centralized cloud service providers AWS, Hetzner, OVH, and Oracle Cloud keep over 66% of Ethereum nodes under control.
Blockchain analytics platform Nansen reported on the distribution of staked ETH, stating that most of it is unprofitable. However, interested parties can sell their ETH after the implementation of the Shanghai upgrade 6 to 12 months after the Merge.
Regulators Influence the Decisions of Cryptocurrency Exchanges
The relevance of decentralized cryptocurrencies is increasingly evident in the economic system, which regulators know well. Many governments struggle to control the use of those assets, threatening to shut down platforms that do not comply with their requirements.
That situation has forced some exchanges to become centralized, against the original principles of freedom and privacy of cryptocurrencies. In the case of Coinbase, it has censored some addresses it believes have violated user agreements.
Meanwhile, Ether is trading at around USD 1,607 and has accumulated an 8.8% loss over the last 24 hours. While its daily trading volume is above USD 22.11 billion, its market capitalization is about USD 193.08 billion, according to CoinGecko.
By Alexander Salazar
