The Alabama Securities Commission (ASC) is making waves in the world of cryptocurrency, as it has just recently ordered Coinbase to provide an explanation within 28 days on how its staking program is not in violation of state securities laws. This development comes on the heels of a separate legal action by the U.S. Securities and Exchange Commission (SEC), which has accused Coinbase of selling unregistered securities. Notably, this occurred a day after the SEC took similar action against Binance, the largest crypto exchange by market cap.
The ASC’s “show cause” order claims that Coinbase and its parent corporation, Coinbase Global, have potentially broken the law by offering their “Earn” program to the people of Alabama. In response, the regulator has tasked Coinbase with proving “why they should not be directed to cease and desist from selling unregistered securities in Alabama.” While the order does not outright forbid Coinbase from providing staking as a service, it does require the company to ensure compliance with state law.
It is worth noting that this order stems from the efforts of a task force composed of ten U.S. state securities regulators that include Alabama, California, Illinois, Kentucky, Maryland, New Jersey, South Carolina, Vermont, Washington, and Wisconsin.
According to ASC Director Amanda Senn, “The ASC is committed to protecting Alabama consumers and investors, including those who choose to invest in the decentralized finance space. This action is another step toward ensuring that investors in crypto asset products are offered the same protections under our laws and are fully aware of the risks involved in these investments.”
Interestingly, this is not the first time that the ASC has taken an interest in the crypto space. Back in 2021, the commission issued a similar order to a now-bankrupt cryptocurrency lender, Celsius, which was also suspected of violating state securities laws with its “Earn Rewards” program.
The ongoing scrutiny over crypto staking programs, as evidenced by both the SEC’s case against Coinbase and the ASC’s investigation, raises critical questions about the future of these services. On one hand, the examination of these programs can potentially lead to more robust investor protection and increased awareness of the risks involved. On the other hand, governmental interference might impede the growth and development of the industry by subjecting it to excessive regulation and red tape.
In conclusion, the tug-of-war between the need for regulation and the desire for innovation in the crypto sphere is well and truly underway. The outcome of this high-stakes contest will likely have significant implications for not just the companies and investors involved, but also the future of the industry as a whole.
Source: Coindesk
