Coinbase Ready to Defend Staking Services in the US

Brian Armstrong, the CEO of Coinbase, said on Twitter that the business will “defend this in court if needed” in support of its cryptocurrency staking services. 

Coinbase CLO Provides an Explanation

The action comes after the crypto exchange Kraken and the SEC signed a deal on Feb. 10 to suspend distribution of staking services or programmes to customers in the nation. 

The SEC claimed that Kraken had neglected to “to register the offer and sale of their crypto asset staking-as-a-service program,” which it has since deemed to be a kind of securities.

In response, Paul Grewal, the chief legal officer at Coinbase, wrote on his blog that “staking is not a security under the US Securities Act, nor under the Howey test.” 

Grewal continued that “trying to superimpose securities law onto a process like staking doesn’t help consumers at all and instead imposes unnecessarily aggressive mandates that will prevent US consumers from accessing basic crypto services and push users to offshore, unregulated platforms.”

Grewal claims that the four factors of the Howey test—investment of money, common enterprise, a reasonable expectation of rewards, and other people’s efforts—are not met by staking.

“The Howey test comes from a 1946 Supreme Court case – and there is a separate discussion to be had about whether that test makes sense for modern assets like crypto,” he said.

The CLO added that “blockchain technology can spur significant economic growth in the US and staking is a safe and critical aspect of that technology. […] But regulation by enforcement that does nothing to help consumers and drives innovation offshore is not the answer. Getting it right on staking matters.”

In January, Armstrong suggested Bitcoin (BTC) as the best long-term solution as an alternative to the earlier plans for a unified currency from Brazil and Argentina. Armstrong remarked: “Wonder if they would consider moving to Bitcoin – that would probably be the right long-term bet.”