According to Coinbase’s chief legal officer, the staking services offered by cryptocurrency exchange Coinbase are “fundamentally different” from those offered by its peer-to-peer exchange Kraken, which was recently criticized by the US securities regulator.
Paul Grewal, Coinbase General Counsel, made the comments in his response to a shareholder question about its staking services during the exchange’s Q4 Q&A session, noting:
“The staking products we offer on Coinbase are fundamentally different from the yield products that were described in the amplification promotion against Kraken. Differences matter.”
The first difference that Grewal highlighted was that Coinbase users always retain ownership of their cryptocurrencies.
Last updated in its terms of service on December 15, 2022 by Coinbase states that it just “facilitates[s] hosting these assets on your behalf” but cannot replace any Ether (ETH) lost in the cut, which refers to the blockchain’s mechanism for punishing bad behavior by reducing the supply of validator tokens.
Grewal also suggested that another difference is that its clients have “the right to a refund” and the firm cannot “just simply decide not to pay any refunds at all.”
He pointed to the listing of the exchange as a public company as another important difference, which allows clients to have a “deep and transparent view of our financial performance.”
By comparison, the Securities and Exchange Commission (SEC) complaint against Kraken alleged that its users lost control of their tokens by offering them to the Kraken staking program, and investors were offered “excessive returns not tied to any economic realities.” ”, while Kraken could also pay “no”. returns at all.”
However, Grewal reiterated calls for regulatory clarity on U.S. betting services, suggesting that the SEC set out its expectations in legal complaints rather than clear rules, noting:
“Rules clarifying these differences will provide real clarity, and we believe the public does not need to go through complaints in federal court to understand what the regulator expects.”
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In a Feb. 13 tweet, Grewal opined that staking per se is not a collateralized trade, using the analogy of picking oranges to clarify his position.
If I grow oranges myself and pick them myself, oranges are not securities. If I grow my own oranges and harvest them with the help of a contractor who charges me, the oranges are still not securities.
— paulgrewal.eth (@iampaulgrewal) February 13, 2023
After SEC Chairman Gary Gensler urged firms to register products with the regulator, Grewal indicated that Coinbase has no problem registering products with the SEC where it is “appropriate” but added:
“I think it’s fair to say that at this point in time, the path to registering products and services that could qualify as securities has not been opened, or at least not easily or easily opened.”
Coinbase is currently facing an SEC investigation into its products similar to the one that led Kraken to settle $30 million with the regulator and stop it from offering staking services to its US customers.
However, Coinbase is set to pick a fight with CEO and co-founder Brian Armstrong, assuming the company will be ready to defy the regulator and take the case to court.
Coinbase staking services are not securities. We will gladly defend this in court if necessary.https://t.co/GtTOz77YV3
— Brian Armstrong (@brian_armstrong) February 12, 2023
Credit : cointelegraph.com
