Comments on Lawsuit Against Kraken
“We are confident that the tokens they are listing are not securities,” Scott Borgas, head of global regulatory policy at cryptocurrency exchange Coinbase, said Wednesday. BlockWorks reported.
Speaking at a digital asset conference in Washington DC. In addition, Kraken’s policy chief, who was also present, made remarks to keep the SEC in check.
One of the reasons, Bogus said, is that the cryptocurrencies offered by COINBASE do not have dividends like securities do. Furthermore, even if all the cryptocurrencies it trades in are considered securities, Coinbase could navigate the situation just fine, he said.
This remark comes after the U.S. Securities and Exchange Commission (SEC) filed a lawsuit in February, alleging that the provision of staking services by cryptocurrency exchange Kraken violated U.S. securities laws. It alleges that Kraken provided a staking service equivalent to an investment contract without prior registration as a security.
Kraken has reached a settlement with the SEC, immediately ceased providing staking services, and agreed to pay approximately ?4.1 billion ($30 million) in civil penalties and profit redemption.
connection: US SEC “Kraken’s virtual currency staking service violates securities law”
What is staking
Staking is a mechanism in which rewards are obtained by depositing a certain amount of virtual currency into the network for a predetermined period of time. Rewards are provided in the same currency as compensation for contributing to the management/maintenance of the network, such as locking the virtual currency (a state where it cannot be moved freely) and approving data for adding blocks.
Kraken keeps SEC in check
Kraken’s Jonanthan Jachym also joined Mr. Bogus on Thursday. He said the settlement with the SEC was “a business decision” and stressed that “the Kraken settlement with the SEC did not create new rules in the United States.”
He added that authorities need to consider how to adapt current laws to cryptocurrencies when working on policies for cryptocurrency trading. This time, Kraken did not engage in a legal battle, but Mr. Yakim is keeping the SEC in check, saying, “The industry is increasingly willing to file lawsuits against the SEC.”
When Kraken was sued by the SEC, Coinbase CEO Brian Armstrong reiterated that the company’s staking service was not a security. “I will defend this in court if necessary,” he said.
Coinbase Chief Legal Officer Paul Grewal also argued on his official blog on the 10th that the staking service offered by Coinbase is not a security. It is like arguing that it does not meet the four elements of the Howie test: financial investment, joint venture, reasonable expectation of profit, and efforts of others.
connection: US Coinbase chief legal officer, SEC check on staking issue
What is Howie Test
The Howie test is a test that determines whether a specific transaction falls under one of the definitions of securities trading called “investment contract” in the United States. Derived from the SEC’s lawsuit against WJ Howey. Although this itself is not legally binding, the SEC has filed lawsuits against multiple ICOs (token sales) based on this test.
The SEC’s key issue in its suit against Kraken is that it offered compensation of up to 21% per annum, while failing to disclose information about its sources of compensation.
Debate arose in the cryptocurrency community as to whether the issue was unique to Kraken’s service or whether it affected other companies’ staking services as well.
connection: How to view the Kraken indictment of the US SEC, and consider the impact on Ethereum staking
Coinbase “does not trade unregistered securities” appeared first on Our Bitcoin News.
