America’s largest cryptocurrency exchange is expecting a flood of staking withdrawal requests after Ethereum developers enable the functionality next month.
While providing details about how the upgrade will impact the business on Wednesday, Coinbase said it could take “weeks to months” for unstaking requests to be fully processed.
Shapella is Coming
In a blog post on the matter, Coinbase explained that the upcoming Shanghai and Capella upgrades (collectively known as Shapella) will allow Ethereum users to unstake their Ether (ETH) for the first time since the Beacon chain launched in 2020.
While Ethereum’s execution layer officially “merged” with its beacon chain in September 2022, stakers holdings remained locked up. This has created a temporary situation in which staking providers like Coinbase can allow users to stake ETH on their platform – but not to withdraw it.
However, after Ethereum completed its Goerli testnet upgrade on Tuesday, the official Shapella rollout is expected by roughly mid-April.
“Unstaking requests will open to all Coinbase customers at the same time and will be relayed to the Ethereum protocol and queued based on when they are received,” wrote Coinbase. As the firm notes, staking requests are processed on-chain, and only acts as a “conduit” to pass unstaked ETH to customer once released by the protocol.
Unstaking requests will be made available from users’ Coinbase accounts about 24 hours after the upgrade is complete. After the request, customers can still expect to be waiting a while.
“Customers may need to remain patient,” said the exchange. “We anticipate the Ethereum protocol will take weeks to months to process unstaking requests immediately following the upgrade.”
To account for this, Coinbase provides a liquid staking option called cbETH to its users as a derivative of staked ETH on the platform. This lets stakers effectively trade ETH while it is still locked up, with the promise of redeemability at a later date.
Attack On Staking Providers
Businesses like Coinbase Earn may not be around in the United States for long: the Securities and Exchange Commission (SEC) recently forced rival exchange Kraken to close down its staking service, slapping it with a $30 million fine in the process.
The commission alleged that the product constituted an unregistered securities offering, while critics of the enforcement action said that Kraken was provided no reasonable pathway to register with the agency.
Coinbase has been one such vocal critic, making multiple public arguments about why staking services do not pass the Howey Test – the SEC’s standard for identifying an investment contract.
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