You may have noticed that the Securities and Exchange Commission (SEC), the financial regulator of the United States, decided to shut down Kraken’s staking program. Initially, this caused fear that Coinbase’s staking services were also over. However, according to Coinbase’s lead attorney, their exchange platform’s staking program is fundamentally different from Kraken’s.
‘The differences matter’
Paul Grewal, the head of Coinbase’s legal department, responded to questions from shareholders on February 21 about the strike program of the stock exchange. “The staking products we offer on Coinbase are fundamentally different from the products described in the Kraken indictment. The differences matter,” said Grewal.
The first important point, according to Grewal, is that Coinbase users retain ownership of the cryptocurrencies in the staking program at all times. Coinbase’s terms of use, which Coinbase last amended on December 15, state that Coinbase only facilitates staking, but does not gain control over the assets.
The fact that Coinbase is a publicly traded company also makes a big difference in the matter, according to Grewal. For that reason, Coinbase is required to be “hugely transparent” about its financial health. Those, according to Grewal, were not the only reasons for the fundamental difference in Kraken’s program compared to Coinbase’s.
Other differences
The SEC’s indictment against Kraken’s staking program also alleges that users gave up control of their assets after placing them in the program. Investors were offered “extraordinary returns” that, according to the SEC, are unrelated to economic reality.
Kraken also had the option to choose not to pay out any returns at all, something that is not possible for Coinbase, according to Grewal. In this sense, according to Grewal, Coinbase’s program differs fundamentally from Kraken’s and the listed trading platform does not seem to have to worry about a ban.
On February 13, Grewal also spoke out in a tweet about strike programs, which, according to him, should not be regarded as an effect. “If I grow oranges and harvest them myself, the oranges are not effects. If I grow oranges myself and harvest them, with the help of a contractor, the oranges are still not securities,” said Coinbase’s lead attorney.
