Trade in cryptos Executives at Coinbase are defending Coinbase’s cryptocurrency staking service, arguing they cannot be classified as a security and threatening the United States.
Brian Armstrong, Coinbase Chief Executive Officer, posted on Twitter that Coinbase is ready to “fight this at court if needed.” This action was taken after Kraken, a cryptocurrency exchange, reached a deal on February 10 with the Securities and Exchange Commission to stop providing staking services and programs to customers in the United States.
According to the Securities and Exchange Commission(SEC), Kraken failed to “register the sale and offer of its crypto asset-staking-asa-service program,” which is considered a security by that agency. Kraken, as part the settlement, has agreed to $30 million in disgorgement. Prejudgment interest and civil penalties will also be paid.
Paul Grewal (Coinbase’s chief legal Officer) expressed his opinions on the matter in a blog post. He said that “staking was not a security under either the US Securities Act nor the Howey Test.” Grewal said, “Trying to impose securities law onto an process like staking doesn’t help consumers in any manner. Instead, it imposes unnecessarily aggressive mandats that will stop US consumers accessing basic cryptocurrency services and push them to offshore, unregulated platforms.”
Grewal claims that staking doesn’t meet the requirements of Howey testing. This test requires a commitment to money, participation in a joint venture, reasonable expectations of rewards and assistance from 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.”
