Coinbase emailed its staking service customers stating that the service may increase. A staker who received the email shared the information on Twitter. 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.
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.
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.
Ever since the platform expanded the number of tokens in which it offers trading, the SEC’s scrutiny of Coinbase has increased. The SEC on 21 July had alleged that the that cryptocurrency exchange Coinbase listed nine crypto asset securities. In its complaint, SEC said that crypto tokens AMP, RLY, DDX, XYO, RGT, LCX, POWR, DFX, and KROM are unregistered securities.
Meanwhile, Coinbase had disputed the SEC’s allegations. “Coinbase does not list securities on its platform. End of story,” Bitcoin.com quoted Coinbase’s chief legal officer Paul Grewal as saying. “The SEC alleges that nine digital assets involved are securities. The DOJ reviewed the same facts and chose not to file securities fraud charges against those involved,” he added further.
