These days, the crypto world is in trouble with the US Securities and Exchange Commission (SEC). Some aspects of the details of the SEC’s Binance and Coinbase lawsuits are quite troubling. Now the SEC has targeted Coinbase’s staking service. In this context, the SEC blames the exchange for allowing 5 altcoins to be staked, including Cardano.
SEC has declared staking of Cardano and 4 altcoins illegal!
As you follow on Kriptokoin.com, the crypto money industry is going through tough times. In a significant development, the U.S. Securities and Exchange Commission (SEC) has sued Coinbase. As part of this lawsuit, he disclosed that Coinbase’s cryptocurrency staking service violated securities laws. Filed on the 5th of June, the indictment accuses Coinbase of violating securities laws by offering staking services for five altcoins. These altcoins are Ethereum (ETH), Cardano (ADA), Solana (SOL), Cosmos (ATOM) and Tezos (XTZ).
The SEC’s decision is based on its interpretation of securities laws, which defines securities as “anything that creates an expectation of profit from someone’s behavior.” According to the SEC, Coinbase’s staking service falls within this definition. Therefore, the SEC considers it a sale of securities.
What is the SEC’s basis for the claims?
The SEC highlights a few key points to support its claims. First, Coinbase has been offering staking services since 2019, allowing investors to earn financial returns through Coinbase’s managerial efforts. This is in line with the securities law definition of a security.
Second, investors participating in the staking process entrust their coins to Coinbase. These coins are stored in the Coinbase wallet and staked on behalf of the investors. Coinbase, on the other hand, charges a commission of 25-35% for its services. The SEC considers this regulation an investment in securities. Because Coinbase acts as an intermediary here. Thus, it makes staking easier and more efficient for individuals.
Third, investors are aware that Coinbase will use its experience and expertise to generate staking income. For the five cryptocurrencies offered by Coinbase, each staking program can be viewed as an investment contract. This is why these altcoins fall into a securities category.
How does the SEC’s targeting of staking affect the crypto world?
The SEC also criticizes Coinbase for failing to submit relevant documents to the SEC and neglecting to provide important information to investors about its staking service. It considers these actions a violation of the Securities Act of 1933, which protects investor interests. Meanwhile, the SEC does not consider the ‘securities’ issue of individually staked coins. On the other hand, other parts of the indictment list Cardano and Solana as Crypto Asset Securities. In addition, Cosmos was also listed as a crypto-asset security in the SEC’s indictment against Binance. However, Ethereum was not included in the cryptoasset securities listings in the Binance or Coinbase indictments.
With the SEC’s decision, experts expect staking services on centralized exchanges for proof-of-stake (POS) coins like Ethereum to face significant repercussions. Currently, major exchanges such as Binance, Coinbase, and Kraken are offering stakes close to 30% for Ethereum. With the SEC starting to regulate Ethereum staking on centralized exchanges, the staking composition landscape is likely to undergo rapid changes.
On the other hand, the indictment against Coinbase’s staking service marks an important step forward by the SEC in providing regulatory clarity for the cryptocurrency industry. It illustrates a stricter approach to the classification of various crypto-related activities under securities laws. Market participants will no longer need to re-evaluate their staking offers to avoid possible legal consequences. They will also have to ensure compliance with the SEC’s guidelines.
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