Despite the recent crackdown by the US Securities and Exchange Commission (SEC) on staking services offered by centralized providers, Coinbase has reiterated to its customers that staking services will continue, and “may increase.”
In a recent customer email, highlighted by popular traders such as @AltcoinPsycho via Twitter on March 10, Coinbase outlined updated staking terms and conditions effective March 29.
Recent email from Coinbase about staking:
“Your staked assets will continue to earn rewards, no action is required… You get rewards from the protocol, not Coinbase”
Coinbase basically told the SEC to hike? pic.twitter.com/ckAAaZXsQb
– Psycho (@AltcoinPsycho) March 10, 2023
In the new term, Coinbase clearly explains that users get rewards from the decentralized protocol, and not directly from the exchange.
“Coinbase only acts as a service provider that connects you, the validator and the protocol,” as opposed to offering a share of the staking rewards itself,” the email said, adding:
“Your staked assets will continue to earn rewards. If you want to continue staking, no action is required. Your staking rewards can increase.
While the understanding of Coinbase’s ongoing and potentially increasing staking rewards may cause concern for the SEC, the clear distinction between protocol rewards and being a service provider appears to be a step to avoid the potential gray area issues that Kraken faces.
As Cointelegraph reported, Kraken agreed to pay $30 million in debt on February 9 for allegedly failing to register its staking-as-a-service program with the SEC. As part of the deal, Kraken can no longer offer staking services in the US
related: Coinbase’s CEO stated that ‘staking’ products are not securities
A key part alleged in the SEC’s complaint, is that users lose control of their tokens by offering to Kraken’s staking program, and investors are offered “outsized returns untethered to any economic reality” with Kraken also being able to pay “no return at all.”
Coinbase has argued on multiple occasions that its staking service is fundamentally different to Kraken. CEO Brian Armstrong also stated on February 10 that the company is happy to defend its position in court “if necessary.”