Coinbase staking 'fundamentally different’ to Kraken's — chief lawyer

The staking services offered by cryptocurrency speech Coinbase are “fundamentally different” to what was offered by its adjacent speech Kraken — which precocious came nether occurrence from the United States securities regulator — according to Coinbase's caput lawyer.

Paul Grewal, Coinbase’s main ineligible officer, made the comments successful his effect to a shareholder question regarding its staking services during a Q&A league connected the exchange’s fourth-quarter results, noting:

“The staking products that we connection connected Coinbase are fundamentally antithetic from the output products that were described successful the reinforcement enactment against Kraken. The differences matter.”

The archetypal constituent of quality Grewal highlighted was that Coinbase users clasp ownership of their cryptocurrencies astatine each times.

In its idiosyncratic statement past updated Dec. 15, 2022, Coinbase states that it simply “facilitate[s] the staking of those assets connected your behalf,” but whitethorn not regenerate immoderate Ether (ETH) mislaid to slashing — which refers to the blockchain's mechanics for punishing atrocious behaviour by reducing a validator’s tokens.

Grewal besides suggested that different quality was its customers person a “right to the return,” with the steadfast incapable to “simply conscionable determine not to wage immoderate returns astatine all.”

He pointed to the exchange' arsenic a publicly-traded institution arsenic different captious constituent of difference, which enables customers to person “deep transparent penetration into our financials.”

In comparison, the Securities and Exchange Commission's (SEC's) complaint against Kraken alleged its users mislaid power of their tokens by offering them to Kraken's staking programme and investors were offered "outsized returns untethered to immoderate economical realities" with Kraken besides capable to wage "no returns astatine all.”

Grewal nevertheless reiterated calls for regulatory clarity connected staking services successful the U.S. suggesting the SEC was outlining their expectations successful tribunal complaints alternatively than done wide regulations, noting:

“Rules making wide these distinctions would supply precise existent clarity and we deliberation the nationalist shouldn't person to parse complaints successful national tribunal successful bid to recognize what a regulator expects.”

Related: Coinbase beats Q4 net estimates amid falling transaction volume

In a Feb. 13 tweet, Grewal had opined that staking successful itself was not a information transaction, utilizing an analogy of harvesting oranges to elaborate connected his position.

If I turn oranges myself and harvest them myself, the oranges are not securities. If I turn oranges myself and harvest them utilizing a contractor that charges maine a fee, the oranges are inactive not securities.

— paulgrewal.eth (@iampaulgrewal) February 13, 2023

On the backmost of SEC Chair Gary Gensler calling connected firms to registry products with the regulator, Grewal indicated that Coinbase has nary issues registering products with the SEC wherever “appropriate,” but added:

“I deliberation it's just to accidental that astatine this constituent successful time, the way to registration for products and services that whitethorn suffice arsenic securities has not been open, oregon astatine slightest readily oregon easy open.”

Coinbase is presently facing an SEC probe into its products akin to the 1 that resulted successful Kraken settling with the regulator for $30 cardinal and being prohibited from offering staking services to its U.S. clients.

Coinbase intends to enactment up a fight, however, with CEO and co-founder, Brian Armstrong, suggesting the institution would beryllium consenting to situation the regulator and take the substance to court.

Coinbase's staking services are not securities. We volition happily support this successful tribunal if needed.https://t.co/GtTOz77YV3

— Brian Armstrong (@brian_armstrong) February 12, 2023