Coinbase to Defend Staking Services in Court: No Security Involved
• Coinbase CEO Brian Armstrong declared that the company’s staking services are not securities.
• The US Securities Act and the Howey test do not consider taking a form of investment that constitutes a security.
• Coinbase asserts that their staking services do not qualify as an investment of monetary value, or a common business under Howey.
Coinbase Defends against Staking Services Ban in Court
The US Securities and Exchange Commission (SEC) recently proposed a ban on staking services, but Coinbase CEO Brian Armstrong declared that the company’s staking services are not securities. Armstrong added that the company is willing to defend this position in court if necessary.
Howey Test Does Not Consider Staking as Security
The SEC uses the Howey test to determine if an investment contract is a security, however, this test does not include taking a form of investment that constitutes a security. Despite this, there is still debate whether the test applies to current assets such as cryptocurrency. Coinbase claims that their staking method does not meet the requirements of the Howey test – which include an investment of money, joint enterprise, reasonable expectation of profits, and other people’s efforts.
Consumer Ownership Retention Declassifies Staking as Asset
According to Coinbase, when customers ask them to stake part of their cryptocurrency they are not giving up anything in exchange for anything else; rather they continue to own what they had before asking for staking services. Furthermore, clients maintain full ownership of these assets and have complete control over them after asking for staking services – making it unsuitable for qualification as an asset according to Howey tests criteria.
Staked Assets on Decentralized Networks Not Considered Common Business
Coinbase also states that assets being stored on decentralized networks do not qualify as “common business” under Howey since validation of transactions is handled by ‘stakers’ instead of centralized organizations. Customers’ fortunes are also independent from Coinbase since rewards received from staked assets are predetermined and unrelated with any central organization’s performance or future prospects.
In conclusion, while speculation remains regarding whether or not cryptocurrencies should be classified as securities according to the SEC’s standards; Coinbase has outlined how its own practices comply with existing regulations surrounding digital assets – even going so far as offering its willingness to support this position in court if needed