Companies
Coinbase Exchange Reacts to the Latest SEC’s Legal Threat
Cryptocurrency exchange Coinbase disclosed on March 22 via a blog post that it received a Wells notice from the United States Securities and Exchange Commission (SEC), relating to regulators taking enforcement action.
Coinbase explained that the legal threat could lead to sanctions on the exchange’s staking program, Coinbase Earn; listed digital assets and wallets; Coinbase Prime Services.
It should be noted that a Wells notice letter contains a warning that is usually followed with an enforcement action. Meanwhile, Coinbase did not provide comprehensive details of the letter apart from possible violations of securities laws.
1/ Today Coinbase received a Wells notice from the SEC focused on staking and asset listings. A Wells notice typically precedes an enforcement action.
— Brian Armstrong (@brian_armstrong) March 22, 2023
However, Coinbase chief legal officer Paul Grewal argued that the crypto exchange requested SEC to identify the specific assets on its platforms that may be classified as securities but it was declined.
He further added that Coinbase has submitted multiple proposals to the SEC concerning registration in a couple of months but there was no response until recently when they issued a Wells letter.
2/ Two years ago the SEC reviewed our business in detail and approved Coinbase to go public. Our S1 clearly explained our asset listing process and included 57 references to staking. Coinbase runs a rigorous asset review process and has rejected more than 90% of assets that have…
— Brian Armstrong (@brian_armstrong) March 22, 2023
Coinbase exchange maintained that its products and services would continue to operate as usual pending the time that investigation would be concluded.
It would be recalled that Coinbase submitted a petition to the SEC on March 20 in a bid to explain to the regulator that staking might not necessarily be universally classified as a security.
Coinbase CEO Describes SEC as a ‘Novice’
In light of the new developments, Coinbase CEO Brian Armstrong described the United States Securities and Exchange Commission (SEC) as a “soccer refs” in a game of pickleball, which invariably means a novice.
Imagine you've got both football and soccer refs on the field, but we're actually playing pickleball (fastest growing new sport in America). The refs can't really agree on the rules of this new game, and one of them decides to change a call they made back in April 2021.
— Brian Armstrong (@brian_armstrong) March 22, 2023
Armstrong made reference to a situation back in April 2021 in which the SEC approved Coinbase’s application to go public. He maintained that SEC cleared all its asset listing then with 57 references to staking.
On the contrary, the SEC seems to be holding a different position. To this end, Coinbase Chief Legal Officer Paul Grewal remarked that the SEC has had no clear rule book on crypto regulation from time immemorial.
Meanwhile, Armstrong has repeatedly criticized the SEC for outright lack of clarity over cryptocurrency regulation, stressing that it has become the major problem affecting the crypto industry.
