As the crypto world prepares for the Ethereum merge next month, popular crypto exchange Coinbase announced on Wednesday the launch of cbETH, its new wrapped and staked Ethereum ERC-20 token.

"Coinbase Wrapped Staked ETH (cbETH) is a utility token that represents ETH2, which is ETH staked through Coinbase," the company tweeted, adding that “cbETH can be sold or sent off-platform, while ETH2 will remain locked-up until a future protocol upgrade."

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Staking is pledging an asset to a network to help it validate transactions, usually for a monetary return or rewards.

A wrapped token is a digital asset that allows the value of an asset to be moved from one blockchain to another. For example, Wrapped Bitcoin (WBTC) allows the use of Bitcoin on the Ethereum blockchain. Traditionally, wrapped tokens are backed by their underlying asset and follow the price of the original asset—meaning the price of Wrapped Bitcoin should follow the price of Bitcoin.

In the Twitter thread, Coinbase said the price of cbETH is not meant to track the price of Ethereum but instead represents staked ETH plus all of its accrued staking interest starting from June 16, 2022, when Coinbase initialized cbETH's conversion rate and balance.

In a help center article, Coinbase says that customers who stake ETH on the exchange will receive the cbETH ERC20 utility token. Coinbase says the new token is a liquid representation of staked ETH.

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Coinbase said holders of staked ETH or ETH2 can "wrap" their ETH2 and receive cbETH through the Coinbase website, adding that wrapping functionality will be "rolled out to eligible users progressively throughout the day."

The company ended its Twitter thread by saying that once this asset is sufficiently supplied, trading of the cbETH-USD pair will launch in phases with support for cbETH restricted in some jurisdictions.

The announcement of the new staking token comes at a time when Coinbase has been the focus of a probe by U.S. regulators for allegedly listing unregistered securities and insider trading, as well as lawsuits, including one for allagedly making "false and misleading statements" about its business.

After the Treasury Department sanctioned the use of the Tornado Cash mixing service earlier this month, Coinbase CEO Brian Armstrong said Coinbase would shut down its Ethereum staking service if asked to comply with any demand from regulators to censor at the Ethereum protocol level.

"It's a hypothetical we hopefully won't actually face," Armstrong tweeted at the time, adding that there may be a better option or a legal challenge that could help reach a better outcome.

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