South Carolina announced that it is dropping charges levelled against the crypto exchange Coinbase while it pursues a bill on Bitcoin Reserve.
The South Carolina state confirmed dismissing the lawsuit against the US largest crypto exchange, Coinbase, alleging illegality in staking services. The Attorney General confirmed the securities division officially withdrew the case following a joint application with Coinbase on March 27. South Carolina joined Vermont, which also withdrew legal action against Coinbase.
South Carolina Drops Coinbase Case
Nine other states levelled The charges in a coordinated action in June 2023. The states alleged Coinbase provided unregistered securities disguised via the crypto staking services. Staking allowed the holders to earn rewards whenever they locked their existing tokens to validate blockchain transactions.
Coinbase chief legal executive Paul Grewal hailed the dismissal via an X post, indicating a new dawn as South Carolina joined Vermont to end the unfounded staking lawsuit. He added that the move was not only a victory for Coinbase but also for American consumers.
Grewal decried the restrictions as they denied the South Carolina consumers the $2 million they would have earned as staking rewards. The executive added that staking services were accessible in South Carolina for both app and website users.
The actions coincided with the lawsuit filed by the US Securities and Exchange Commission alleging violations of the securities laws. The securities watchdog would dismiss its case on February 27, suggesting a shift in the regulatory approach to admitting crypto staking.
Despite dropping the case, Coinbase faces lawsuits in eight other states, with each alleging that the trading platform failed to register the product under the securities laws.
The lawsuits indicated the Brian Armstrong-led crypto exchange was selling unregistered securities via the staking service. The prosecutors suggested that users would receive rewards after depositing the crypto assets, mainly as a percentage fee. The states issued cease-and-desist orders citing provisions in their securities regulations.
Grewal indicated the need for clear rules and consumer protection. He considered South Carolina delivering justice and hoped other states would review the bans imposed on crypto staking.
South Carolina Welcomes Crypto
South Carolina affirmed legal development a day after dismissing Coinbase’s lawsuit with a new bill to guide digital assets investment. Representative Jordan Pace brought the proposal for the Strategic Digital Assets Reserve Act.
This proposal would enable the state treasurer to allocate 10% of the state funds to digital assets. Unlike other crypto reserve proposals, the South Carolina bill captures Bitcoin severally. The bill’s approval would permit the creating of a Bitcoin reserve capped at 1 million BTC to match a similar goal as the federal government in establishing a Strategic Bitcoin Reserve.
The treasurer would add BTC to the state funds,, including the General Fund and Stabilization Reserve Fund, alongside other investment funds under the treasurer’s office. Although the bill has Bitcoin as the primary focus, the proposed reserve would extend to other cryptos. Nonetheless, the proposal offers no specific mention of stablecoins or Ethereum.
Pro-crypto Agenda at State Level
The proposal by South Carolina conforms to the growing trend where over 36 states have active bills on Bitcoin reserves. This shows increased interest in the digital assets at the state level.
This development emerged when President Donald Trump issued an executive order at the onset of March to establish a digital asset stockpiling and strategic BTC reserve. The US targets allocating the seized assets from the criminal actors to develop the federal reserves.
South Carolina portrays a departure from regulatory action to facilitating digital assets adoption. The dual actions of the state could become a model for the other eight states as they strike a regulation-innovation balance within the crypto space.
The pro-crypto agenda has seen the landscape change across the United States, with firms such as Coinbase expanding in anticipation of more opportunities. Recently, Coinbase concluded the acquisition of crypto exchange Deribit coincidentally as it re-enters Indian market following the recent regulatory approval.
