The move to restrict crypto staking has been seen by many, including Coinbase CEO, as a “terrible path” for the United States.
American crypto exchange Coinbase has already entered the defensive mode for the staking services it currently offers. According to Coinbase CEO Brian Armstrong, the exchange is ready to face off with the US Securities and Exchange Commission (SEC) in court if it ever becomes necessary.
The statement follows a dispute that rival exchange Kraken had with the SEC, which was settled on February 10. The settlement ended up seeing Kraken pay a $30 million fine for failing to register the offer and sale of its “crypto asset staking-as-a-service program.” It also stops the exchange from ever offering staking services within the country.
Meanwhile, the move to restrict crypto staking has been seen by many, including Coinbase CEO, as a “terrible path” for the United States. In his Twitter post, Armstrong wrote:
“Coinbase’s staking services are not securities. We will happily defend this in court if needed.”
SEC Is More Interested in Regulation by Enforcement, Says Coinbase CLO
Following SEC’s recent settlement with Kraken, Coinbase’s chief legal officer, Paul Grewal, has also weighed in on the issue. In a lengthy blog post, Grewal explained that staking is not classified as a security, either under the US Securities Act or under the Howey test.
Firstly, he noted that the purpose of securities law is to correct imbalances in information. And as a fact, there is no such thing as an imbalance of information in staking, Grewal insists. He says that all participants are connected on the blockchain and have equal access to the same amount of information.
Furthermore, he spoke about the Howey test. Grewal argues that staking does not meet all four elements of what can be classified as a security. The elements are; investment of money, common enterprise, reasonable expectation of profits, and the efforts of others.
Overall, Grewal believes that the endless show of authority of the SEC doesn’t help consumers at all. At best, they stifle innovation and push U.S.-based users to other unregulated platforms, he says.
It might also be worth noting that Coinbase shares are down over 20% since Kraken first fell under the scrutiny of the SEC. This is despite Coinbase’s insistence that its staking services are “fundamentally different” than Kraken’s.
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