Coinbase’s document stated, “Staking services are not a monolith. A number of different models exist and while some might be categorized as offering an investment contract, core staking services that we describe in this letter are not.”
Crypto exchange Coinbase submitted an 18-page long staking petition to the SEC following the regulatory agency’s recent settlement with Kraken over its staking services.
In the official document, Coinbase claimed that core staking services do not fit under the prongs of the Howey Test. The firm added that most staking models can be classified as software services instead of investment contracts.
According to Coinbase, at its core, staking does not require clients to invest their assets. Users who participate in staking gain rewards in exchange for validating blockchain transactions. This makes staking different from traditional securities where clients expect profits by making bets on the success of companies.
Coinbase emphasized that stakers and service providers do not possess common enterprise as users are free to unstake, sell or dispose of their assets without facing issues from other customers or the service providers. Moreover, the yields on staking tokens depend on the protocol instead of the service providers.
The document stated that the SEC and other regulators have yet to provide a registration process for the few staking products that can be grouped as investment contracts.
Furthermore, Coinbase highlighted that inappropriate regulation of crypto services could impact financial innovations by driving crypto platforms away from the US. According to the firm, several nations, including the UK, Singapore, and UAE are competing with the US to establish crypto hubs. Coinbase added,
“We believe it is possible for the SEC to constructively engage on these issues without compromising protections in a way that preserves US. innovation. This would ensure that US capital markets remain the gold standard of the world.”
Written by
Ayush Pande
Ayush Pande is a hardware, gaming, and crypto writer based in India. He's a tech enthusiast who's fascinated by the potential of blockchain technology.
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