![]() SEC Chair Gary Gensler, actually, shortly after Ethereum made this move, came out saying that staking could be considered a security. And it actually came up early in September when Ethereum officially made its move to using staking as its model for validating transactions. So this is going to be an issue that is going to be continually watched. Coinbase, in its last quarter, actually, earned a total 10.8% of its total revenue from crypto staking and about $60, $62, $63 million. And this has been noticeable to Coinbase's balance sheet. Now, obviously, these companies take a fee from that. And in return, it offers something like a 5.3% annual return. And what the companies do is they pull together the assets so that they can meet the capital requirements and allow this. So what has happened in the industry is that crypto firms have offered a service to allow essentially any customers to stake their assets. Now, using Ethereum, the second largest blockchain, as an example, staking works by having- essentially anyone can participate as long as they can fork over about $52,000 in Ether by the market rate. And so questions have come up for several years, actually, about whether this constitutes an investment contract. So there are a lot of blockchain projects that essentially cannot work without it.Īlso from a financial perspective, it involves depositing cryptocurrency into a smart contract in return for some kind of yield. Now, as a primer for about crypto staking, it's used as an alternative to crypto mining to essentially validate transactions on the blockchain. We will do so.DAVID HOLLERITH: Well, Rachelle, in Armstrong's tweet from yesterday, he made the argument that making clear, clearer regulation for crypto staking boils down to a national security issue, obviously imploring that it needs to be permitted in the US. ![]() "We believe that the rule of law needs to be respected and you know, if and when it becomes necessary to assert those rights under law. “We are eager to cooperate and to share information about how our product services work," Grewal said. A source familiar with the situation told Yahoo Finance the company would plan to fight any staking-as-a-service charges from the agency. In August, Coinbase disclosed it had received several subpoenas from the SEC for various activities, including related to its staking program.Īsked whether Coinbase would fight any charges from the SEC directed to its staking program, Grewal said while it would be premature to say anything until the company faced such charges, it's seeking "a more transparent public process" to iron out rulemaking for the crypto activity. Shortly after the enforcement action against Kraken, SEC Commissioner Hester Pierce said in a dissenting opinion that "more transparency around crypto-staking programs like Kraken’s might well be a good thing," but added "staking services are not uniform." It's fully transparent," Grewal said Thursday night. There's no magic or there's no mystery about how that works. "We deduct a commission that we disclose in our terms of service. The Howey test says an investment contract exists if investors have a "reasonable expectation" of earning profits from the work of others. Grewal argued Coinbase's staking program is "fundamentally different" from what Kraken had run, and does not meet the Howey test's criteria of a security.
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