Coinbase, one of the largest cryptocurrency exchanges in the world, is urging the US Securities and Exchange Commission (SEC) to clarify its stance on the regulatory status of staking services. The company is asking for guidance on whether or not such services constitute an investment contract and, if so, how they should be registered with the SEC.
Crypto Exchange Asks for Guidance on Investment Contract Classification
Coinbase argues that the SEC’s recent enforcement action against the company over its staking services creates unnecessary uncertainty for market participants. The exchange claims that the SEC has not previously made its position on staking services known, despite ample opportunity to engage with the crypto industry and its participants.
Staking services are a crucial part of the digital asset ecosystem, with consensus mechanisms forming the backbone of many cryptocurrencies. Coinbase argues that applying securities laws to the transaction validation process could stifle financial innovation and harm the growing number of Americans who own crypto.
In a letter to the SEC, Coinbase called on the regulatory body to provide a path to workable registration for staking services that may constitute an investment contract. The exchange also requested that the SEC clarify its views on various aspects of staking services and solicit public input on those views.
The lack of an established process for registering staking services that constitute an investment contract creates uncertainty for market participants. Coinbase has previously argued that there are features of investment contracts involving digital assets that do not fit squarely within existing regulations.
Coinbase’s letter to the SEC concludes by stating that getting the regulatory treatment of staking services right is critical. The exchange argues that allowing innovation to move offshore to jurisdictions that have more clarity on the regulatory status of staking services is unnecessary. Coinbase believes that it is possible for the SEC to constructively engage on these issues without compromising protections in a way that preserves US innovation.