- Top executives of leading crypto exchange clarify company’s stance on crypto staking
- Coinbase (NASDAQ: COIN) stock dropped over 21% in the last five days
The United States Securities and Exchange Commission’s abrupt actions against prominent crypto exchange Kraken sent chills to the border crypto space. The take of the financial regulator for crypto staking signals others to take care of their business related to the same. Leading US crypto exchange Coinbase has clarified intentions if the SEC would come after chasing the crypto staking operations.
Chief executive office of Coinbase, Brian Armstrong, took to Twitter and noted that the staking services of the crypto exchange do not fall under securities obligations. He mentioned looking at the matter within the court if it requires the company. The tweet also consisted of a blog post by Coinbase chief legal officer Paul Grewal.
Grewal noted that crypto staking gained popularity following the awareness amongst the people after recognizing the energy concerns with traditional proof of work (PoW). Proof of stake (PoS) consensus mechanism surfaced as a potential alternative which also brought staking’s importance.
He wrote, “this shift has come with debates over what moving to proof of stake means at the regulatory level. Given the importance of this technology, getting regulation wrong could do serious harm to the development of the crypto industry in the US.”
While countering the claim of staking to treat as security, Grewal argued that it’s “not a security under the US Securities Act, nor under the Howey test.” The financial regulator employs the test to check if an investment contract is to be treated as a security.
Citing the formation of the Howey test after a Supreme Court in 1946, he argued that the same test “makes sense for modern assets like crypto” and is subject to a separate discussion. Even then, crypto staking does not meet the obligations of the test—money investment, common enterprise, profit expectations and others’ efforts.
Although following the argument at first glance, it seems that crypto staking could not be treated as a security, the final decision depends upon the financial watchdog. Meanwhile, the other possibility of the crypto community could save crypto staking from SEC’s jaws remains alive with Coinbase CEO’s firm stance to oppose the decision if similar actions were to be taken against the firm akin to Kraken.
The US SEC reportedly accused Kraken of using its stalking-as-a-service product to sell unregistered securities. The allegations were not enough, as the regulator imposed a hefty fine worth 30 million USD and ordered the closing of the staking services.
The instance shook the crypto industry and many firms involved in a similar business, and the opposition from Coinbase came in the wake of it.
TheCoinRepublic previously reported when Coinbase CEO raised concerns after rumors of the alleged ban of crypto staking for retail investors. Even then, he stated several reasons to regulate the market properly, ensuring its prosperity while eliminating the possibility of its destruction.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while his post-graduation. He is a keen observer of details and shares his passion for writing along with being a developer. His backend knowledge about blockchain helps him give a unique perspective to his writing
Source: https://www.thecoinrepublic.com/2023/02/13/coinbase-will-tussle-with-sec-if-asked-to-shut-down-crypto-staking/