Coinbase Will Defend Crypto Staking in Court, Says CEO

Coinbase plans to defend its crypto staking services in court, arguing that it does not qualify as a security under the US Securities Act or the Howey Test.

In a tweet on Sunday, Coinbase CEO Brian Armstrong said the crypto exchange would “happily defend” the fact that staking services are not securities. 

Armstrong linked to a blog post written by the exchange’s chief legal officer Paul Grewal, explaining why staking services do not qualify as securities as per the regulator’s definition. The process of staking doesn’t meet the four elements of the Howey test, nor can it be classified as such under the US Securities Act, said Grewal.

“Trying to superimpose securities law onto a process like staking doesn’t help consumers at all and instead imposes unnecessarily aggressive mandates that will prevent US consumers from accessing basic crypto services and push users to offshore, unregulated platforms,” he said.

Coinbase’s firm stance on the matter comes after crypto exchange Kraken reached a $30 million settlement with the U.S. Securities and Exchange Commission on Feb. 9. The SEC alleged that Kraken failed to register the offer and sale of its staking service, which qualifies as securities in their view.

“Today’s action should make clear to the marketplace that staking-as-a-service providers must register and provide full, fair, and truthful disclosure and investor protection,” said SEC Chair Gary Gensler in a statement.

Kraken has now ended staking services for its U.S.-based customers but plans to offer the service to non-U.S. clients through a separate subsidiary.

According to Grewal, Kraken’s staking services are “fundamentally different” from what Coinbase offered, because Kraken essentially offered a yield product. Speaking to The Block, he said Coinbase customers’ staking rewards came from the protocol offering them, and all commissions were appropriately disclosed.

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• Source: https://unchainedpodcast.com/coinbase-will-defend-crypto-staking-in-court-says-ceo/