Coinbase tweets sharp clarifications towards SEC’s claims
Coinbase clarifies all the assertions and questions that have so far been raised by the SEC on its staking services. Taking it for securities or any other similar service is based on the grounds that have been finally moved by Coinbase. Brian Armstrong and Paul Grewal took to Twitter to share the statement that sheds light on the controversy.
The CEO & Co-Founder of Coinbase, Brian Armstrong, has committed to defending the fact that its staking services are not securities.
Coinbase's staking services are not securities. We will happily defend this in court if needed.https://t.co/GtTOz77YV3
— Brian Armstrong (@brian_armstrong) February 12, 2023
Paul Grewal has shared points via his Twitter account for the same. Paul is currently a part of Coinbase as the Chief Legal Officer. To set the record straight, Paul has picked the first assertion where SEC believes that there is no for investors to receive answers related to their investments. A response to this speaks that Coinbase discloses all the critical information to the staking users through a Retail User Agreement.
Another assertion is that users give the ownership of their tokens to the platform when they agree to terms of services by clicking on the dotted line. Meaning they transfer their ownership to the platform. Paul has said that title and ownership of the tokens remain with the users at all times. Only the tokens are held in 1:1.
Tokens staked are not investments to Coinbase. The platform simply moves the tokens to a native chain-level smart contract to lock the tokens until users choose to withdraw their participation.
SEC asked where rewards really come from, to which Coinbase has answered that rewards come from blockchain that puts the tokens to work in a Proof of Stake consensus mechanism. Paul has elaborated on this point by saying that staked tokens act as a guarantee of legitimacy for every transaction that has just happened and has been added to the blockchain. Rewards are distributed among the users for their participation in the security aspect of the process.
Also, Coinbase does make sufficient margins to meet the ends. This comes in the form of a flat-rate commission that is deducted from the rate set by the protocol. The same is disclosed to the users way ahead of distributing the staking rewards.
SEC has raised a question asking if crypto protocols are genuinely creating any value or if they are diluting the already-existing values. An answer to this has been mentioned by Paul on Twitter, saying that staking is a way to earn rewards with users claiming the return on their token, the value of which can rise or fall in the market. This is similar to any other token that exists in the market.
Clarifications are important following Brian Armstrong citing a rumor about the SEC’s supposed ban on crypto staking. This went on to raise a concern about the intentions of the SEC in restricting the involvement of retail investors in crypto staking.
It appears that Coinbase has done its part in clarifying all the assertions and answering all the questions raised by the SEC. It remains to be seen what the SEC does next.