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SEC pressure drives Bitstamp to shutter Ether staking services in US

Crypto exchange Bitstamp is shuttering its staking services for US customers in light of regulatory tension, following Kraken.

Bitstamp, a European crypto exchange founded in 2011, has announced it will be shuttering its staking services for US customers from next month.

All staked assets will be unstaked from September 25, CEO Bobby Zagotta told several news outlets. Customers will continue to earn rewards as normal until then.

“Rewards, along with the principal, will be credited to users’ main Bitstamp account balances,” added Zagotta. 

All other services on BitStamp will be unaffected by the pull back.

Related: SEC v. Binance lawsuit brings 10 new cryptocurrencies to ‘securities’ classification

It’s understood that the move comes in light of regulatory tension from the US Securities and Exchanges Commission (SEC). 

SEC Chair Gary Gensler has said on several occasions that proof-of-stake tokens are securities, based on the Howey Test, subjecting them to securities law. 

The Howey Test is a legal benchmark used in the US to decide if a transaction qualifies as an investment contract. It looks at four core aspects: the investment of money, whether there’s a common enterprise, the expectation of profits, and the efforts of others. 

Proof-of-stake coins such as Ethereum may trigger the Howey Test because investors often purchase and stake their assets with the expectation of profit. It’s also a common enterprise that generates profits from other peoples work (i.e. validators and other participants). 

However, not all PoS coins are the same. Other coins, such as Tezos (XTZ) and Algorand (ALGO), are structured to emphasise utility and functionality, whereby stakers are incentivised to stake their tokens to gain governance rights, rather than for the expectation of profit (though a profit is often made). 

The SEC now views at least 61 PoS coins as securities, including ADA, SOL, BNB, MATIC and more. 

Earlier this month, Bitstamp announced it will suspend trading of many of these listed coins, including MATIC, SOL and MANA.

Many big names in Web3 have heavily criticised the SEC’s stance on viewing PoS coins as securities. 

Binance for instance maintains that BNB, its native token, is not a security, despite the SEC listing it as one. A spokesperson recently said that BNB is “a native token, designed to create an internal economy; thus, its value derives from its participants.”

US-based exchange Kraken also shuttered its staking services in February following litigation with the SEC.

Disclaimer: CryptoPlug does not recommend that any cryptocurrency should be bought, sold, or held by you. Do conduct your own due diligence and consult your financial advisor before making any investment decisions.

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