At the heart of a long reflection around the blockchain and cryptocurrencies, the United States wishes to quickly change their regulations in the field. In this sense, under the impetus of the SEC, certain rumors point to a future ban on cryptocurrency staking on US soil.
It’s no secret that the United States has a special relationship with crypto currencies. Far from being unanimous, but nevertheless strongly present in the American political sphere, THE crypto currencies regularly tense the American leaders.
Since the setbacks linked to the depeg of the UST and the bankruptcy of FTX, the negative effects of crypto currencies are the subject of particular attention. At the start of the year, THE staking would be particularly targeted by the Securities and Exchange Commission (SEC).
As a reminder, staking refers to the fact of placing a certain number of coins in sequestration in order to be able to become a validator of a network and to participate in its operation. Present in particular on Ethereum since The Merge, staking has been a strong activity in the United States.
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The SEC would like to ban the staking of cryptocurrencies
Although only at the rumor stage, this information is already having a strong resonance in the industry. It must be said that the possibility of this ban comes from a person aware of the evolution of this market: Brian Armstrong, the CEO of the cryptocurrency platform Coinbase.
According to the latter, “the SEC would like to get rid of the staking of crypto currencies in the United States for individuals”. Behind this will of the American financial regulator, there is a long reflection around the legal nature to be given to cryptocurrencies that are the subject of staking.
The use of the Howey test
Concretely, staking could have the effect of bringing down all crypto currencies based on the proof-of-stake system in the legal field of securities (security token). Gold, securities qualification would have serious consequences for the entire ecosystem.
However, Howey’s test relies on four distinct conditions:
- It must be an economic investment in money (1)
- This investment must be placed in a joint venture (2)
- Investors should expect profits (3)
- These profits must be made through the efforts of a third party (4)
Take the example of ETH. The major argument to justify that Ethereum responds favorably to the conditions of the Howey test is based on the fact that the act of staking would simply be an investment contract. In effect, the validator would invest money (1) in a joint venture made up of the other parties taking part in the validation process (2) with the expectation of receiving staking benefits (3) that come directly from the efforts of others. validators participating in this process (4).
It is important to note that while cryptocurrencies based on the Proof of Stake were considered as Security token, many additional obligations would weigh on the issuers of these crypto currencies.
An outcry against this potential ban
Far from satisfying the community, this rumor was quickly the subject of many observations. In the first place, the legal qualification of security token is debated since according to many experts in the field, the use of the Howey test would be nonsense.
To justify this position, they explain that consistent case law is generally based on flexible interpretation based on economic realities of the relationship between the promoter and the investors.
Now, although there is an investment and an expectation of profit, the last two conditions would be difficult to meet since there is actually no common enterprise and the staking rewards are not really based on the efforts of others.
Brian Armstrong finally explains that “staking is an important innovation that brings many positive improvements, including scalability, security and a reduction in the carbon footprint of the industry”.
Instead of going through a ban based on a flimsy legal interpretation of staked cryptocurrencies, the Coinbase boss calls the regulator “to work with industry players to publish clear rules to protect consumers, but also innovation and the national security interests of the United States.
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