After Kraken’s SEC investigation, Coinbase chief legal officer Paul Grewal contrasted its staking offering with Kraken’s.
According to Coinbase’s head legal, Kraken, which was recently criticized by the US securities regulator, offers “fundamentally different” staking services.During a Q&A on Coinbase’s fourth-quarter results on Feb. 21, chief legal officer Paul Grewal responded to a shareholder concern about its staking services:
Coinbase’s staking goods differ from Kraken’s yield programs. Differences matter.”Grewal originally noted that Coinbase users always possess their currency.
Coinbase’s user agreement, last amended Dec. 15, specifies that it “facilitate[s] the staking of such assets on your behalf” but cannot restore Ether lost to slashing, the blockchain’s mechanism for penalizing poor activity by lowering a validator’s tokens.
Grewal added that its clients have a “right to the return” and the firm cannot “just just decide not to pay any returns at all.”
Another key difference is the exchange’s registration as a publicly traded corporation, which gives clients “deep transparency access into our financials.”The Securities and Exchange Commission’s complaint against Kraken claimed that users lost ownership of their tokens by offering them to Kraken’s staking program and that investors were offered “outsized returns untethered to any economic fundamentals” or “no returns at all.”
Nonetheless, Grewal maintained calls for regulatory clarification on U.S. staking services, stating the SEC was articulating their expectations in court complaints rather than explicit regulations:
“Rules making clear these distinctions would provide very meaningful clarity and we think the public shouldn’t have to interpret complaints in federal court to understand what a regulator expects.”Grewal tweeted on Feb. 13 that staking was not a security transaction, comparing it to gathering oranges.
Oranges I produce and harvest are not securities. Oranges grown and harvested by a contractor are not securities. “I think it’s fair to say that at this point in time, the path to registration for products and services that may qualify as securities has not been open, or at least quickly or easily open,” Grewal said, after SEC Chair Gary Gensler’s call for firms to register items with the regulator.
Coinbase is currently under SEC investigation for its goods, similar to Kraken’s $30 million settlement and ban on U.S. staking.Coinbase CEO and co-founder Brian Armstrong said the business would battle the regulation in court.
