The statements, made in the wake of the $30 million settlement that Kraken, another U.S.-based crypto-currency exchange, reached with the Securities and Exchange Commission (SEC), also criticize the institution’s approach to the matter.
Coinbase defends its Staking-as-a-Service program
Coinbase, the US-based leading crypto-currency exchange, has published a blog post differentiating its staking-as-a-service program from others in the market, and clarifying that, for the institution, this type of service is not a security offering.
In a blog post published on February 10, Paul Grewal, the company’s general counsel, states how getting this point wrong in the regulations can affect the entire crypto industry in the country. The’article explains the company’s position on the issue, stating:
Staking is not a security within the meaning of U.S. securities law, nor within the meaning of the Howey test. Trying to superimpose securities law on a process like staking does not help consumers at all and instead imposes unnecessarily aggressive mandates that will prevent American consumers from accessing basic cryptographic services.
In addition, Grewal also criticized the way the U.S. SEC handles the regulation of crypto-currencies, explaining that regulation by enforcement is a “poor substitute” for actual rulemaking.
Rules and rulemaking could and would address all of this. That’s why, after all, Congress passed the Administrative Procedure Act in the first place. Regulation by enforcement is a poor substitute.
paulgrewal.eth (@iampaulgrewal) February 10, 2023
SEC Chairman Gary Gensler Hints at New Regulatory Action
Coinbase’s position appears to be in direct opposition to the one the U.S. SEC has taken when it comes to centralized platforms offering crypto-currency staking services. On Feb. 9, the institution reached a $30 million settlement with Kraken, another crypto-currency exchange, for the unregistered sale and offering of these services to its customers.
SEC Chairman Gary Gensler hinted that more such actions are coming for other industry players, saying that such firms need to disclose to their customers the risk associated with such activities. On February 10, during an interview on CNBC’s Squawk Box, Gensler said::
Other platforms should take note and make an effort to come into compliance, make the appropriate disclosures, register and so forth.
Coinbase offers staking programs for various crypto-currencies as part of its portfolio of services and charges a flat fee for operating these services. In a recent report, JPMorgan predicted that new staking funds coming to Ethereum after the upcoming Shanghai upgrade will likely go to decentralized platforms like Lido because of the different advantages they offer over centralized providers.