Coinbase CEO Brian Armstrong

Coinbase CEO says he will “happily defend” staking service against securities claims

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Brian Armstrong, the chief executive officer of the Coinbase cryptocurrency exchange, said on Twitter Monday that the company will “happily defend” its staking services in court against claims that they need to be classified as securities. Coinbase, which trades on the Nasdaq, is the biggest crypto exchange in the U.S. Its shares last traded at US$57.09 on Friday, down 2.5%.

See related article: Coinbase CEO Brian Armstrong says SEC has ‘terrible’ idea to ban crypto staking for U.S. retail customers

Fast facts

  • “Coinbase’s staking services are not securities. We will happily defend this in court if needed,” Armstrong tweeted, sharing a blog post written by Paul Grewal, the chief legal officer of Coinbase.
  • Grewal said that staking is not a security under the U.S. Securities Act nor under the Howey test, the latter of which the U.S. Securities and Exchange Commission (SEC) uses to determine whether an investment contract is a security.
  • According to Grewal, Coinbase’s crypto staking services do not meet any standards of the Howey test — investment of money, common enterprise, reasonable expectation of profits, and efforts of others — as staking services are decentralized and not entrepreneurial, and users always maintain ownership of their assets which does not make them an “investment.”
  • Imposing securities law onto crypto staking will prevent U.S. consumers from accessing crypto services and push them to unregulated, offshore platforms, Grewal wrote.
  • Last week, the SEC fined the U.S.-based crypto exchange Kraken US$30 million for failing to register their crypto staking programs. Kraken in response announced the closure of its on-chain staking services for U.S. users on Thursday. 
  • The SEC is also reportedly planning to sue Binance USD (BUSD) stablecoin owner and issuer Paxos Trust Company as it regards the stablecoin as an unregistered security.

See related article: Securities and Exchange Commission may sue BUSD stablecoin issuer Paxos, WSJ reports 

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