Coinbase’s chief legal officer stated that the staking services provided by Coinbase differ from those offered by Kraken. The US securities regulator recently criticized Kraken.
During a Q&A session about Coinbase’s financial results, one of the shareholders asked about its staking services. Coinbase’s chief legal officer replied to the question and discussed the differences between Coinbase’s staking services and of other exchanges.
The staking products that we offer on Coinbase are fundamentally different from the yield products that were described in the reinforcement action against Kraken. The differences matter.
Grewal said the main difference between Coinbase and other exchanges is that Coinbase users always own cryptocurrencies. Coinbase assists users in staking assets but doesn’t cover lost Ether from slashing, according to the updated user agreement. Slashing is a way that the blockchain punishes validators who misbehave by reducing their tokens.
Grewal stated that Coinbase users have a guaranteed right to receive returns, and the company cannot refuse to pay them. He also mentioned that Coinbase is a publicly-traded company, meaning customers can easily see the company’s financial information.
The SEC filed a complaint against Kraken, alleging that users relinquished control of their tokens in Kraken’s staking program. Kraken offered investors returns that were disproportionate to economic realities and had the option not to pay returns.
Grewal said there must be clear regulations for staking services in the US, as the SEC only outlines its expectations through court complaints. On February 13th, Grewal shared his opinion on Twitter that staking is not a secure transaction.
“Rules making clear these distinctions would provide very real clarity and we think the public shouldn’t have to parse complaints in federal court in order to understand what a regulator expects.”
Coinbase Calls for Clear Regulations on Staking Services & SEC Registration
Gary Gensler, the chair of the SEC, recently asked companies to register their products with the SEC. Grewal said Coinbase has no problems registering its products with the SEC when necessary. However, he added that there needs to be clear regulations and guidance from the SEC regarding staking services.
I think it’s fair to say that at this point in time, the path to registration for products and services that may qualify as securities has not been open, or at least readily or easily open.
Coinbase is under SEC investigation for its products, similar to Kraken’s $30M settlement and bans on US staking services. However, CEO Brian Armstrong has said the company is willing to challenge the SEC and take the case to court.
Related Reading|New York Fed Analyzes Relationship Between Bitcoin & Macro Factors
This article conveys general information, and the opinions expressed should not be considered personal advice for any individual or specific security or investment product.
Comments (No)