Coinbase has submitted a comment letter to the US Securities and Exchange Commission (SEC) requesting clarification on whether core staking services are considered securities under current US securities laws.
In the letter, which was submitted on March 20, 2023, Coinbase argues that core staking services do not meet any of the prongs of the Howey test, which is used to determine whether an asset is a security. The Howey test consists of four prongs, all of which must be met in order for an asset to be considered a security.
Coinbase’s argument is based on the fact that core staking services are a means of earning rewards for holding certain cryptocurrencies, rather than an investment in a common enterprise with the expectation of profit. The letter states that “staking involves a holder of a particular cryptocurrency entrusting their assets to a validator node in exchange for the ability to participate in block production and transaction validation, and to earn staking rewards. This process does not involve any investment in a common enterprise, and there is no expectation of profit.”
Coinbase goes on to explain that the rewards earned through staking are not guaranteed and are subject to market fluctuations, making them more akin to a form of interest than an investment in a security. The letter also notes that staking rewards are not tied to the success of any particular project or enterprise, but rather are based solely on the holder’s participation in the validation process.
The letter concludes by requesting that the SEC provide clear guidance on the regulatory treatment of core staking services, stating that “this clarity will provide a level of certainty that will be beneficial to investors and market participants alike.”
Coinbase’s submission of this comment letter is significant, as it comes at a time when the SEC is increasing its scrutiny of the cryptocurrency industry. The agency has been particularly focused on the issue of whether certain cryptocurrencies should be classified as securities, and has taken enforcement action against several companies for allegedly offering unregistered securities in the form of initial coin offerings (ICOs).
The SEC’s response to Coinbase’s request for clarification on core staking services will be closely watched by the cryptocurrency industry, as it could have significant implications for the future development of staking as a means of earning rewards in the cryptocurrency space.
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This article was republished from azcoinnews.com