Trade in cryptocurrencies Executives at Coinbase are defending the company’s cryptocurrency staking services, arguing that they cannot be categorized as a security and threatening to take the subject to court in the United States.
The Chief Executive Officer of Coinbase, Brian Armstrong, said on Twitter that the business is prepared to “fight this in court if necessary.” The decision to take this action comes after the cryptocurrency exchange Kraken came to a deal with the Securities and Exchange Commission on February 10 to cease providing staking services or programs to customers in the United States.
According to the Securities and Exchange Commission (SEC), Kraken did not “register the offer and sale of its crypto asset staking-as-a-service program,” which the SEC has determined to be a security. Kraken has agreed to pay $30 million in disgorgement, prejudgment interest, and civil penalties, in addition to ceasing its services, as part of the settlement.
In a recent blog post, Coinbase’s chief legal officer, Paul Grewal, expressed his opinion on the matter. He said that “staking is neither a security under the US Securities Act, nor under the Howey test.” Grewal continued by saying, “Trying to superimpose securities law onto a process like staking does not help consumers in any way, and instead imposes unnecessarily aggressive mandates that will prevent US consumers from accessing basic cryptocurrency services and push users to offshore, unregulated platforms.”
Grewal contends that staking does not satisfy the requirements of the Howey test, which need a commitment of money, participation in a common venture, a reasonable expectation of rewards, and the assistance of other people. According to what he stated, “The Howey test originates from a 1946 Supreme Court decision — and there is a different conversation to be conducted about whether or not that test makes sense for current commodities like crypto.”