Services provided by Coinbase differ from Kraken-Lawyer
2023.02.22 02:46
Services provided by Coinbase differ from Kraken-Lawyer
By Ray Johnson
Budrigannews.com – According to Coinbase’s chief lawyer, the staking services offered by the cryptocurrency exchange are “fundamentally different” from those offered by its peer exchange Kraken, which was recently criticized by the US securities regulator.
During a Q&A session on the exchange’s fourth-quarter results, Coinbase’s chief legal officer, Paul Grewal, made the remarks on February 21 in response to a shareholder question about its staking services, noting:
“The yield products that were described in the reinforcement action against Kraken are fundamentally different from the staking products that we offer on Coinbase. Differences are important.
Grewal’s first point of differentiation was that Coinbase customers always retain ownership of their cryptocurrencies.
Coinbase’s user agreement, which was last updated on December 15, states that it only “facilitate[s] the staking of those assets on your behalf” and cannot replace any Ether (ETH) lost to slashing. Slashing refers to the blockchain’s mechanism for punishing bad behavior by reducing a validator’s tokens. Coinbase’s user agreement was last updated on December 15.
Grewal added that a further distinction was that its clients have a “right to the return,” and the company cannot “simply decide not to pay any returns at all.”
Another important point of differentiation, he said, is the exchange’s registration as a publicly traded company, which gives customers “deep transparent insight into our financials.”
In examination, the Protections and Trade Commission’s grumbling against Kraken claimed its clients failed to keep a grip on their tokens by offering them to Kraken’s marking project, and financial backers were advertised “outsized returns untethered to any monetary real factors” with Kraken likewise ready to pay “all purchases are final by any means.”
However, Grewal reiterated his calls for U.S. staking services regulatory clarity, implying that the SEC was outlining their expectations through court complaints rather than clear regulations, noting:
“We think the public shouldn’t have to parse complaints in federal court in order to understand what a regulator expects,” and “rules making clear these distinctions would provide very real clarity.”
Grewal argued that staking was not a security transaction in and of itself in a tweet on February 13, using the analogy of harvesting oranges to explain his position.
Oranges are not securities if I cultivate and harvest them myself. Oranges are still not securities even if I grow them myself and harvest them using a contractor who charges me a fee.
— paulgrewal.eth (@iampaulgrewal) February 13, 2023 In response to SEC Chair Gary Gensler’s call for businesses to register their products with the regulator, Grewal stated that Coinbase has no problem registering its products with the SEC where it is “appropriate,” but he added the following:
“I think it’s fair to say that the path to registration for products and services that may qualify as securities has not been open, or at least not readily or easily open at this point in time,”
Similar to the one that led to Kraken’s $30 million settlement with the regulator and the company’s suspension from providing staking services to customers in the United States, Coinbase is currently the subject of an SEC investigation into its products.
However, Coinbase intends to fight, as CEO and co-founder Brian Armstrong suggests that the company is prepared to challenge the regulator and go to court.
“Staking services offered by Coinbase are not securities. If necessary, we will gladly defend this in court.” https://t.co/GtTOz77YV3
