Coinbase Argues Its Staking Services are Not Securities, Criticizes SEC Regulatory Approach
Coinbase, one of the US-based cryptocurrency exchanges, says through a blog post that it differentiates its staking-as-a-service program from others in the market and makes it clear that such a service is not a good option for the institution. The service does not constitute security.
In a blog post published on January 10, the company’s Chief Officer and Legal Spokesperson, Paul Grewal, said that wrongly applying this point could affect the entire industry in the country and the article addressed the issue. Explaining the Company’s stand on the same, it states that: Staking is not a security under the United States Securities Act. It does nothing at all to stop consumers trying to impose securities law on the process and instead imposes unnecessarily invasive mandates that Americans can and certainly will prevent consumers from accessing basic services. In addition, Grewal also criticized cryptocurrency exchanges by the US Securities and Exchange Commission, explaining that exchanges by enforcement are certainly a “poor substitute” for actual regulation. Coinbase’s position points directly to the same stance that the United States Securities and Exchange Commission has taken regarding platforms offering cryptocurrency staking services. On February 9, the institution completed a $30 million deal with Kraken, another cryptocurrency exchange, to sell unregistered and offer these services to its customers. Chairman of the Securities and Exchange Commission
Gary Gensler has hinted at such actions coming for other players in the industry, stressing the need for companies to disclose to customers the risks associated with such activities. In an interview on CNBC’s Squawk Box on February 10, Gensler said that other platforms should take note and try to bring compliance, including proper disclosure, registration, and the like.
Coinbase offers cryptocurrency staking programs for individual cryptocurrencies as part of its service portfolio and collects a flat fee for operating these services. In a recent report, J.P Morgan predicted that new staking funds coming to Ethereum following the upcoming Shanghai upgrade are likely to move to decentralized platforms like Lido due to the distinct advantages they offer compared to centralized providers.