Coinbase’s cbETH: Introducing Wrapped Staked ETH Token

Coinbase launched Wrapped Staked ETH (cbETH), which aims to improve the management of Ethereum (ETH) assets and grant users unprecedented control over their holdings. cbETH’s use case means investors can buy, sell, or hold the token.

Per Coinbase Help, users can wrap their staked ETH into cbETH without fees, offering a cost-efficient solution for asset management. However, standard fees apply to transactions or sales involving cbETH.

According to its whitepaper, the conversion rate between ETH and cbETH determines the number of cbETH units obtained during the wrapping process. This rate isn’t fixed; it is driven by rewards earned on the amount of staked ETH and the ratio of staked ETH units to the total cbETH supply.

Regarding pricing, cbETH closely tracks the value of the staked ETH alongside any accrued rewards. Nonetheless, disparities may arise between cbETH and staked ETH prices due to market dynamics across various crypto exchanges. As a result, the market may assign different values to cbETH than its underlying staked ETH.

Coinbase also emphasizes the ease of transacting the wrapped ETH, meaning investors can now directly buy and sell cbETH on the Coinbase exchange. Additionally, traders can easily convert cbETH to other digital currencies or transfer it to personal wallets for off-platform trading.

This simplistic move seeks to empower users with greater control over their staked assets. Moreover, users earn rewards through the staking process, which provides additional incentives for participating in Ethereum staking. However, the Coinbase website clarifies that dealing with cbETH has tax implications.

While wrapping and unwrapping staked ETH is not taxable, selling cbETH for fiat currency or other cryptocurrencies constitutes a standard crypto sale, subject to taxation. Despite the absence of official guidance from tax authorities, Coinbase advises users to maintain accurate records for tax reporting purposes.

Via Coinbase Help, cbETH wrapping is accessible on the Coinbase website and mobile app. Investors can navigate their Coinbase account or mobile app to wrap staked ETH to access their Ethereum balance. After selecting the Ethereum Earnings APY balance, they can proceed to unstake to initiate the wrapping process. Following the details review, users specify the desired wrapping amount and confirm the transaction.

On the other hand, unwrapping cbETH back to staked ETH follows a similar process. Users access their Coinbase account, locate their Coinbase Wrapped Staked ETH Wallet, and actively select the ‘see options’ under ‘wrap or unwrap.’ Lastly, to unwrap cbETH for Staked ETH, users must enter the desired unwrapping amount, followed by a confirmation step before finalizing the transaction.