Coinbase Global and the US Securities and Exchange Commission have been at loggerheads for some time, and on Friday, Coinbase CEO Brian Armstrong released a video message calling the SEC’s warning “not constructive” and “not good for America.”
The friction between Coinbase and the SEC is part of a bigger attempt by the US government to regulate the cryptocurrency sector. SEC Chair Gary Gensler has called for cryptocurrency exchanges to register with the agency, which is the source of the animosity between Coinbase and the SEC.
This warning was issued by Armstrong in response to a Wells Notice that was delivered to Coinbase a month ago. The Wells Notice stated that the staff of the SEC had formed a “preliminary determination” to suggest an enforcement action for Coinbase for violating federal securities laws.
Coinbase CEO Opens Up On SEC’s Hardline Crypto Stance
In response to the Wells notice, Coinbase, the largest cryptocurrency exchange in the United States by volume, filed a letter to the SEC arguing that the regulator’s staff’s legal arguments are “flawed and untested” and that an enforcement action “would present major programmatic risks to the commission.”
While Armstrong made it clear in his video that he was ready to take on the SEC in court, Coinbase’s written response to the SEC claimed that the agency’s threat of litigation “appears intended to pressure” the organization into agreeing with the SEC’s position that all cryptoassets on the Coinbase platform are securities.
Coinbase Lawyer Says They’re Ready To Cooperate With SEC
Also featured in the video was Coinbase’s chief legal officer, who indicated the company was ready to visit the SEC at any time to create a feasible future for the cryptocurrency industry in the United States.
In the 14 days since 2023 rolled in, the SEC has taken action against crypto entities and individuals with 14 separate orders of enforcement. Crypto staking schemes offered by other exchanges including Bittrex and Kraken have also been accused of offering the sale of unregistered securities.
Coinbase has responded by saying it will oppose any regulation of its own staking scheme, which is distinct from Kraken’s.
Despite claims from the SEC staff that Coinbase’s staking services constitute investment contracts, Coinbase maintains that it does not list, clear, or affect trading in securities through its platform.
The Elusive Middle Ground
Meanwhile, even while Coinbase’s share price is still down 82% from its IPO in April 2021, it was up more than 53% since the beginning of January.
Regulatory bodies and industry participants alike are struggling to find a middle ground between fostering innovation and ensuring the safety of the cryptocurrency market, and the ongoing conflict between Coinbase and the SEC is a microcosm of this broader fight.
While the final resolution of this issue is still up in the air, it highlights the importance of maintaining open lines of communication and working together among all necessary parties to promote the success of the crypto business in accordance with applicable laws and regulations.
-Featured image from Coinpedia