The Securities and Exchange Commission (SEC) has been closely monitoring crypto staking offerings in the United States. This has caused speculation that Coinbase, the largest US-based exchange, could be the next to face scrutiny from the regulator. In response, Coinbase’s Chief Legal Officer Paul Grewal recently released a blog post asserting that their staking services do not meet the criteria of the Howey test, and therefore should not be considered securities. Grewal explained that crypto staking does not involve an investment of money, does not meet the common enterprise element, and does not involve the expectation of profit, among other points. He also noted the need for appropriate regulations in the US to avoid users moving to offshore jurisdictions.
The news of the SEC’s scrutiny has caused Coinbase’s stock (COIN) to plummet. In one trading session, the shares dropped by 14%, the largest daily price decline in the company’s history. On a weekly scale, the stocks are down by roughly 22% and trade under $60. This is a stark contrast to earlier this year when the stocks spiked back to $80 amid bitcoin’s recovery. The future of Coinbase and the crypto sector remains uncertain, but it is clear that the SEC’s actions have had a significant impact on the market.