2023-02-11
Paul Grewal, Coinbase's chief legal officer, argued in a blog post that Coinbase's stakingservice is not securities, with the post coming a day after Kraken closed staking services in the U.S., in response to SEC action.
The use of "proactive authority" and the enforcement of securities laws in the staking system could "prevent U.S. consumers from accessing basic crypto services and push users to turn to unregulated offshore platforms." He added.
"Staking is not securities under U.S. securities laws or under the Howey Test, which the SEC uses to determine whether an investment contract is securitization," Grewal said.
Because stake-taking clients "retain full ownership of their assets at all times, as well as the right to 'withdraw' those assets", this service does not constitute a money investment. Even under the expanded definition.
Staking also does not meet the Howey Test criteria for a typical organization "because assets are staked on a decentralized network" and transactions are monitored "through the user community, not the general organization," Grewal said.
In addition, the reward of the stake is determined through protocol, not Coinbase, "so this does not meet the definition of the law."
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