• Coinbase, the largest US-based crypto exchange, recently published a blog post claiming that its staking products do not meet the SEC’s Howey test criteria and should thus not be considered securities.
• Paul Grewal, Chief Legal Officer of Coinbase, argued that crypto staking rewards are simply payments for validation services provided to the blockchain and not a return on investment.
• All of these statements come as COIN, an exchange-traded product backed by Bitcoin and Ethereum, has dropped 22% in the last week.
Coinbase Claims Staking Products Not Securities
Coinbase, one of the largest US-based cryptocurrency exchanges, recently released a blog post in which they claim their staking products do not meet the criteria set out by the SEC’s Howey Test and should thus not be considered securities.
Paul Grewal, Chief Legal Officer of Coinbase, stated in his post that crypto assets are staked on decentralized platforms and therefore do not meet the common enterprise element of Howey’s test. He further explained that staking rewards are merely payments for validation services provided to blockchains and cannot be seen as returns on investments.
COIN Prices Drop 22% Weekly
All this comes at a time when COIN, an exchange-traded product backed by Bitcoin and Ethereum has dropped 22% in just one week. The sudden drop is likely due to investors‘ concerns regarding Coinbase’s ability to settle with regulators without any potential penalties or fines being imposed upon them.
SEC Criteria For Security Classification
The SEC uses four criteria when determining whether an asset falls under their security classification – efforts of other parties involved in producing profits from investments; money invested; expectation of profit; and common enterprise among all parties involved. As per Coinbase’s claims none of these apply to their staking products so it would make sense for them to avoid any potential legal issues or otherwise unfavorable outcomes if investigated further by regulatory authorities.
Coinbase Assurance Regarding Staked Assets
Grewal also reassured customers that they retain full ownership over their crypto funds while staking them on Coinbase: „They own exactly the same thing they did before.“ This statement could potentially encourage more people to take up such services since it eliminates any doubts about losing control over one’s assets while participating in coin staking programs offered by the platform.
Throughout its blog post Coinbase was adamant about its stance regarding its staking products – they do not constitute securities according to SEC guidelines and hence should remain unaffected by any future investigations or enforcement actions taken against them.. In addition to this assurance, customers can rest assured that their assets will remain fully theirs during any participation in such programs offered by Coinbase itself as well as other third party service providers available through its platform.