Coinbase Global has recently issued a statement refuting the allegations by the U.S. Securities and Exchange Commission that it violated securities laws.
Chief Executive Officer Brian Armstrong and Chief Legal Officer Paul Grewal said Coinbase might consider listing securities in the future, but current regulatory uncertainty makes the firm reluctant to do so at this time. Grewal also said that Coinbase does not list securities.
Coinbase was served with a Wells notice from the SEC last month, which signaled that the agency’s staff plans to suggest an enforcement action. The agency declined to comment on the situation, citing its standard policy of not acknowledging ongoing investigations.
The incident reflects the increasing tension between the crypto industry and the SEC, which believes that numerous digital assets are securities operating outside its supervision and unlawful.
Met with the SEC today. We’ll continue pushing for a clear rule book in the U.S. for crypto regs.
The U.S. can’t afford to fall behind on this important technology to update the financial system.
Also important for regulators to set policy and THEN enforce it. Not start with… pic.twitter.com/EaPD7wDbSx
— Brian Armstrong 🛡️ (@brian_armstrong) April 21, 2023
“No law or regulation authorizes the SEC to charge Coinbase for the alleged violations in the Wells notice,” said Grewal. “We are on the brink of a fight that doesn’t need to happen, and frankly shouldn’t happen.”
In recent months, the tension between the crypto sector and the SEC has been increasing as the regulator attempts to address what it perceives as insufficient compliance among intermediaries in the crypto industry.
SEC Chair Gary Gensler has called for more active regulation of the “Wild West” of crypto and emphasized the need for firms dealing with digital asset securities to register with the agency. In response, Coinbase filed an appeal with a federal court to urge the SEC to clarify whether new rules would be established for digital assets.
In an interview, Coinbase Deputy General Counsel Katherine Minarik said the company would expand its focus beyond the U.S. as necessary. She also emphasized its commitment to pursuing regulatory clarity, saying, “We are going to leave no stone unturned to push for regulatory clarity here.”
Today, we filed a narrow action in the U.S. Circuit Court to compel the SEC to respond “yes or no” to a rulemaking petition we filed with them last July asking them to provide regulatory guidance for the crypto industry. 1/4 https://t.co/rlsS1DIFfl
— paulgrewal.eth (@iampaulgrewal) April 25, 2023
SEC’s pressure on Coinbase
The SEC has intensified its crackdown on the cryptocurrency industry following the collapse of FTX last year. As a result, services like Coinbase Earn are under scrutiny for not being registered.
Although Coinbase’s spot market and other products, such as Earn, Prime and Wallet, could be affected as a result of the SEC’s formal notice, the firm said it would continue to operate normally and remain confident in the legality of its assets and services.
Spent the day in DC meeting with members of congress. We need regulatory clarity in the U.S. for the centralized players in crypto for many reasons – consumer protection, national security, economic growth, etc.
The SEC has caused untold harm to America with its policy of… pic.twitter.com/eV13Ny66db
— Brian Armstrong 🛡️ (@brian_armstrong) April 20, 2023
“We welcome a legal process to provide the clarity we have been advocating for and to demonstrate that the SEC simply has not been fair or reasonable when it comes to its engagement on digital assets,” Grewal said.
Upon receiving the notice, Coinbase CEO Brian Armstrong also tweeted, “While we understand that this is all part of the journey to reforming our financial system, we are right on the law, confident in the facts, and welcome the opportunity for Coinbase (and by extension the broader crypto community) to get before a court.”
Others subject to similar SEC scrutiny
Digital currency exchange firm Kraken recently faced regulatory pressure from the SEC as well. It later agreed to cease staking in the U.S. in February without acknowledging or denying the agency’s allegations that “the program was an unlawful offer and sale of securities.”
Paxos Trust Co., a New York-based blockchain company, received a Wells notice accusing it of issuing unregistered security in the form of the Binance USD stablecoin.
Last March, regulators also targeted Tron founder Justin Sun and eight celebrities, accusing them of market manipulation and violating federal securities laws. This reignited debates about whether cryptocurrency is a security subject to the SEC’s authority.