Letter to SEC from Cryptocurrency Exchange Coinbase: ‘Clear This Matter!’

US-based leading cryptocurrency exchange coinbaseto the Securities and Exchange Commission (SEC) sent a letter requesting clarification on whether core staking services are considered securities.

Cryptocurrency Exchange Coinbase Requests Clarification From SEC

In the letter, Coinbase argued that core staking services do not meet any of the criteria for classification as securities as defined in the Howey Test.

The Howey Test is a legal framework used by the SEC to determine whether a particular financial instrument constitutes a security.

According to Coinbase, core staking services are not investment contracts and do not include money or asset transfers.

Rather, it is a tool for users to participate in the governance of blockchain networks by staking their tokens to verify transactions and earn rewards.

Coinbase also noted that the Howey Test consists of four stages, all of which must be met for an investment contract to be considered a security.

These stages include (1) investing money, (2) making a joint venture, (3) investing with the expectation of profit, (4) benefiting solely from the efforts of others.

Coinbase has argued that core staking services do not meet any of these stages. Specifically, users who stake their tokens on a core staking service do not invest money in a joint venture as they do not pool their funds.

Also, there is no expectation of profit as rewards from staking are not guaranteed and may fluctuate depending on market conditions.

Overall, Coinbase’s letter to the SEC aims to clarify the regulatory status of core staking services and alleviate potential concerns about their classification as securities.

As the cryptocurrency industry continues to evolve and innovate, it is likely that more companies will seek regulatory guidance on the classification of new financial instruments and services.

*Not investment advice.