Coinbase Announces Custody for Stacks (STX): Why it’s a Big Deal
The case of Stacks (STX) and their long road to being listed on U.S.-based exchanges is an interesting one. Stacks took every precaution to ensure they complied with the SEC to mitigate issues, yet it had the opposite effect. Stacks was the first cryptocurrency to receive SEC qualification for a sale in the United States. However, this came with a major ramification: Stacks was then immediately deemed a security and hasn’t been able to really be listed on U.S. exchanges since. Things have changed, though, and especially today. Coinbase announced they now support deposits and withdrawals for the $STX token, which, if you haven’t heard is the smart contract chain being used by Miami’s ‘Miamicoin’ initiative.
Coinbase Custody now supports deposits and withdrawals for Stacks $STX. Details here ? https://t.co/obxqX3VMgE pic.twitter.com/EYCPuZ5ESY
— Coinbase Institutional (@CoinbaseInsto) September 2, 2021
Stacks had all the reasons from the beginning to be listed: they registered with the SEC, the first-ever such event, and they have a stellar team out of Princeton University. Stacks is a unique chain, as it is actually secured by Bitcoin, and benefits natively from Bitcoin’s security. “Stacks uses Bitcoin to settle transactions on the Bitcoin blockchain every block. This makes all Stacks transactions inherit Bitcoin’s finality and settlement because Stacks transactions can be verified on the Bitcoin blockchain”. They use a unique system called proof-of-transfer to make this happen. Stacks raised big dollars from the likes of Winklevoss capital and was featured in CNBC’s “top 100 startups to watch”.
Their founder, Muneeb Ali declared earlier this year that after filings with the relevant authorities, “Stacks Cryptocurrency No Longer Treated as a US Security”. We are now seeing that come to fruition today with Coinbase’s announcement. An imminent announcement that Stacks will become available to be traded on Coinbase is surely on the way, and research indicates it has been one of the most suppressed projects due to its inability to be listed in the United States.
Coinbase Custody now supports Stacks, the only L1 chain where you can earn BTC yield from consensus.
— muneeb.btc (@muneeb) September 2, 2021
So why would Stacks try to deal with the SEC in the first place, knowing they would be listed as a security and deal with this long road to US listings? This is because they actually did it on purpose. This makes sense in light of SEC chair Gensler’s comment that most crypto’s trading are in fact securities–as it stands today. Stacks clearly took the path of dealing with the SEC first, rather than later. Stacks mentioned they did this “out of an abundance of caution.” They took this arduous route in order to prove their decentralization over time, which they now indicate they have completed, and clearly, Coinbase agrees, which by proxy, means the SEC does, too.
They used the litmus test the SEC uses to determine whether or not something is deemed a security: This is called the Howey test. In order for crypto to meet this litmus test, (which clearly doesn’t happen most of the time) they must prove decentralization, actually. “Without the presence of this centralized entity, the transacted good is not considered a security. As Hiro (Stacks) believes it has decentralized the Stacks ecosystem, that centralized managerial role is absent, and so it has concluded Stacks are no longer securities.”
Muneeb said that Stacks is “proud of our regulatory path and hope that it can serve as a model for others seeking to innovate in the crypto industry,” However, most projects do not take this path, and in fact most likely will have to prove to the SEC at some point they meet this litmus test of decentralization, a feat that many projects would not meet.
This wasn’t too big of a surprise, as OKCoin, which is a US-based entity of OKEX, has had Stacks listed for quite some time. You can actually earn BTC yield for locking it up on OkCoin. This is only possible due to Stack’s consensus mechanism which is intrinsically tied to Bitcoin. Stacks wants to bring DeFi to Bitcoin, and has already created ‘native Bitcoin swaps’. As Muneeb describes it: “Anyone can send a pure BTC transaction to swap to another asset in a trustless manner. For example, instead of trading BTC/USDC on a centralized exchange, you can do such a swap natively using a pure Bitcoin transaction.” This is live on Stacks and can be done here.
So why is this big? It displays there is in fact a light at the end of the tunnel when working with the SEC upfront, and that they are allowing compliant protocols to prove their decentralization, and allow them to finally rest easy and not fret that the SEC will come knocking one day. It also displays a willingness on the part of the SEC that we have not seen in previous iterations. Basically, it can be summed up like this: pay now, or pay later with the SEC. In this case, delayed gratification has put Stacks in a position that almost no other crypto is in. That is to say, they have been bestowed the SEC blessing. And with DeFi on Bitcoin in mind, maybe Jack will be thinking of Stacks.
The post Coinbase Announces Custody for Stacks (STX): Why it’s a Big Deal appeared first on CryptosRus.
Text source: CryptosRus
