BTCS Inc. a blockchain technology-focused company, clarified how StakeSeeker, its non-custodial staking-as-a-service platform, differs from other industry staking programs.
On February 9, 2023, the Securities and Exchange Commission (“SEC”) charged Kraken with failing to register the offer and sale of their crypto asset staking-as-a-service program, whereby investors transfer crypto assets to Kraken for staking in exchange for advertised annual investment returns of as much as 21 percent. BTCS’s non-custodial staking-as-a-service platform, StakeSeeker, differs from Kraken’s custodial model in several key material ways.
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The current test to determine if an offering is a security is the Howey test, which can be summarized as an investment of money in a common enterprise with the expectation of profits solely from the efforts of others.
Kraken’s custodial model:
Key Howey Test Components:
- They take control of your crypto assets
- They pool your crypto assets with others (common enterprise)
- There is an expectation of profit from their efforts
Other key factors:
- They determine the annual percentage return (“APR”) and have right to change at their discretion
- They offer instant rewards and instant unstaking
- Customers earn passive rewards
- Fees are located in Terms of Service documents
- They need stringent cybersecurity measures
- They claim high annual returns
BTCS’s non-custodial StakeSeeker model:
Key Howey Test Components:
- We do not take control of your crypto assets or crypto rewards
- Since we don’t have control of your crypto assets, we can’t pool them
- While there is an expectation of profit, we believe our work is ministerial in nature
Other key factors:
- The respective blockchains determine both the APR and directly pay the crypto asset rewards to the delegator, not us
- Both the reward frequency and unstaking is determined by the respective blockchain protocol
- We don’t have customers; delegators are active and participate in a respective blockchain consensus mechanism by staking their crypto assets
- Our fees are publicly available both on our website and broadcast to the respective blockchain protocols
- While we have strong cybersecurity measures in place, we don’t have control over your crypto assets and you are depending on the security of the respective blockchain to keep your crypto assets secure
- We clearly disclose that StakeSeeker returns are estimated based on reported network data.
“SEC Commissioner Gary Gensler clearly stated in his video tweet, “Not your Keys, Not your Crypto”, and we couldn’t agree more,” stated Charles Allen, BTCS’s CEO. “When you stake with us, you are not an investor in our platform. You are a delegator to our nodes. If we go bankrupt, you do not get in line because we don’t have your crypto assets, you unstake them and move on,” continued Allen. We encourage investors to watch Commissioner Gensler’s video tweet.
“As the oldest public company in the crypto and blockchain sector, we’ve learned many lessons over the years. For example, we once held crypto at Mt. Gox but luckily withdrew it prior to its implosion. We learned from that near miss in 2014 and keep minimal crypto at exchanges,” said Charles Allen. In light of FTX, it’s time to get educated and take control of your crypto assets. Your keys, your crypto. When you stake with us, you are participating in a blockchain’s consensus mechanism, and you do not transfer ownership of your crypto assets to us.
In light of recent failures such as FTX, Blockfi, and Celsius we encourage investors and crypto enthusiasts alike to learn about the value proposition of our non-custodial staking model. Your keys, your crypto, stake (not steak) with us.
Many investors ask why we don’t offer staking for Ethereum, and the reason is simple. It’s a proof-of-stake blockchain, not a delegated proof-of-stake blockchain, and in our opinion, there isn’t currently a clear path to offer Ethereum staking without inadvertently creating a security. While we believe our non-custodial staking does not create securities, we can provide no assurances that either the SEC or other regulatory authorities will agree.
What is StakeSeeker?
StakeSeeker is a leading crypto dashboard that offers a unique solution for crypto holders to manage and grow their digital assets. StakeSeeker sets itself apart by solving the common problem of central tracking for crypto holdings stored on various exchanges and digital wallets, providing crypto holders with an improved user experience and the ability to easily track and analyze the performance of their entire portfolio. The platform combines innovative portfolio analytics and a simplified staking process, all in one place. With StakeSeeker, crypto holders can earn rewards by staking through the non-custodial Stake Hub and evaluate their portfolios across multiple exchanges and wallets with ease.
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