Coinbase’s Chief Legal Officer Claims Staking Services Not Securities

• Staking services do not constitute securities since they do not pass Howey test as per Paul.
• Grewal claims that neither crypto staking nor Coinbase’s offering fulfils any conditions.

The SEC’s recent move to investigate some crypto staking offerings in the United States has captured the attention of the global cryptocurrency community. After Kraken’s settlement with the government. Many people expected Coinbase to have to do the same, thus the biggest US-based exchange decided to speak out.

Paul Grewal, the chief legal officer of the exchange, said in a blog post. That the company’s staking services do not constitute securities since they do not pass the Howey test. Investment assets are classified as securities by the SEC based on four criteria: the involvement of other people, the investment of money, the anticipation of profit, and the existence of a common firm.

Does Not Fulfill Any of These Conditions

Grewal claims that neither crypto staking nor Coinbase’s offering fulfils any of these conditions. The consumers keep all of their cryptocurrency and own precisely the same item they did before, so there is no risk of losing money.

Moreover, Grewal stated that crypto assets don’t fit the common business criterion since they are staked on decentralized platforms. Since staking incentives “are simply payments for validation services provided to the blockchain, not a return on investment,” they do not meet the criterion of being reasonably expected to generate a profit.

Finally, the services provided by stake providers are not “entrepreneurial, managerial, or a significant factor” in determining whether customers obtain incentives, therefore these grants are not contingent on the work of others. As a result, Coinbase’s executive stressed the need for well-thought-out laws that won’t stunt the industry’s growth. 

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