In light of the recent Ripple v. US Securities and Exchange Commission (SEC) decision, investment company Berenberg Capital has issued a warning that Coinbase’s “Earn” program may encounter legal difficulties. Concerns have been raised about the Earn program’s potential compliance with US securities regulations since it enables retail users to stake certain tokens in return for incentives.

The interruption of Coinbase’s US business operations and the probable termination of the Earn program owing to regulatory scrutiny are two potential risks highlighted in Berenberg’s study. The current stock boom of Coinbase’s publicly listed shares, which have increased by more than 130% since reaching a low on June 6, might also be impacted by any regulatory action taken against the company. The stock of Coinbase (COIN) was trading at $109 as of the most recent update, which is much higher than the firm’s June low of $46.5.

The Ripple v. SEC court ruling’s phrasing is where the real problem rests. The XRP token from Ripple is “not in and of itself” a security, according to Judge Analisa Torres; rather, how the token is utilized will determine how it is classified. In particular, staking, where users get incentives for participating, may eventually cause XRP to be regarded as a security, much like Coinbase’s Earn program.

Berenberg: Coinbase Earn Faces Significant Regulatory Challenges, Security  Classification Risk - Globe EchoTokens that qualify as securities cannot normally be traded on US-based cryptocurrency exchanges since doing so would qualify them as unregistered securities exchanges. Case was filed by the SEC against Binance.US accused the exchange of specifically committing this offense. Although there is still controversy about the categorization of XRP, Coinbase and other major US exchanges have already made statements about reintroducing XRP as a tradeable asset on their systems.

In the US, the Commodity Futures trade Commission (CFTC) regulates commodities trade, while the Securities and Exchange Commission (SEC) regulates securities trading and exchanges. The only cryptocurrency that has been officially verified to be regulated in the US as a commodity is Bitcoin (BTC).

Despite the legal ambiguities and conflicting messages from the Ripple v. SEC decision, Coinbase and other US-based exchanges are moving through with the relisting of XRP on their exchanges. Most US cryptocurrency exchanges delisted XRP earlier in 2021 because of worries about its regulatory status.

The cryptocurrency market and investors will be keenly monitoring the events as Coinbase navigates any legal hurdles around its Earn program in order to gauge their influence on the company’s operations and the larger cryptocurrency market.


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