Even with the Securities and Exchange Commission’s position on staking, Coinbase, the popular crypto exchange, has assured its customers of continuing the service on its platform. In its email, the exchange promised that the staked amounts would continue to earn rewards.
The SEC recently stepped up its action against crypto firms, alleging that digital assets are securities. It also clamped down on the staking services of crypto exchange Kraken, as the firm didn’t register the program before offering it. Notably, the commission focuses on the staking services that centralized exchanges offer.
Updates On Coinbase Staking Services
Coinbase emailed its staking service customers stating that the service may increase. A staker who received the email shared the information on Twitter. According to @AltcoinPsycho, the exchange disclosed that it is updating its staking terms and conditions, and the changes will start on March 29.
A notable update on the terms and conditions slated to take effect from March 29 is that the staking rewards will come from Coinbase’s decentralized protocols and not from the exchange. It clarified its stance as a service provider connecting the customers, the validators, and the staking pools.
Many customers may wonder if the decision to continue its staking won’t have repercussions. But the exchange made some statements to clarify its stance by saying it’s not rewarding stakers directly and that it is only serving as a connector for stakers, staking pools, and validators.
This way, even though SEC is irked about the service, there won’t be grounds to attack Coinbase like Kraken. Also, recall that Coinbase and its CEO Brian Armstrong shared posts declaring distinctions between its staking services and Kraken’s.
Brief On Kraken’s Run-In With SEC
Kraken, a staunch competitor of Coinbase, lost its right to offer staking services to US customers after SEC clamped down on it. In the February 9 filing by SEC, Kraken had offered staking services to US customers since 2019.
It advertised the service as an easy-to-use platform where investors earn benefits through Kraken’s efforts. The exchange also promised that stakers would earn 21% percent as their annual staking rewards.
But in SEC’s allegations, many users of the staking service lost control of their tokens by staking it, which brings them more risks and little protection.
Today we charged Kraken with failing to register the offer and sale of their crypto asset staking-as-a-service program, whereby investors transfer crypto assets to Kraken for staking in exchange for advertised annual investment returns of as much as 21 percent.
— U.S. Securities and Exchange Commission (@SECGov) February 9, 2023
The SEC shared the announcement in a press release alleging Kraken failed to register the offer and sale. It also stated that Kraken offered an outsized reward untethered to economic realities and even retained the right not to pay stakers any reward.
After much deliberations, Kraken agreed to settle with SEC and pay $30 million in disgorgement, prejudgment interest, and civil penalties. It also agreed to stop offering staking services to its US customers. But in a blog post, Kraken announced that it would continue to offer the service to non-US customers.
Featured image from Bankrate and chart from Tradingview.com