In 18 months, the exchange’s representatives have failed to get an answer from officials about the principle on which they categorize cryptocurrencies as securities

“We asked the SEC for feedback, all we got was a lawsuit.” Coinbase CEO tells of 30 unsuccessful meetings with SEC officials

30.11.2023 - 09:37

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4 min

What’s new? Brian Armstrong, the CEO of the US crypto exchange Coinbase, again has criticized the Securities and Exchange Commission (SEC) for refusing to give recommendations on regulatory compliance. In an interview with Decrypt, he revealed that the exchange has held 30 meetings with officials over the past 18 months, but has never been able to figure out what principle they use to determine whether a particular cryptocurrency is a security. During this period, Coinbase has already sent a petition to the SEC asking it to clarify its position on the industry, a response to which it managed to get only through the court, and later received a lawsuit from the regulator itself on charges of trading in unregistered securities.

Decrypt’s material

What else is known? During numerous meetings, representatives of the exchange failed to get clarity from officials about which cryptocurrencies are securities and which are commodities. The only exception was bitcoin, which the head of the SEC Gary Gensler unambiguously referred to the second category, which he stated, including publicly.

“We asked the SEC for feedback, all we got was a lawsuit,” Armstrong emphasized.

Thus, in March of this year, the SEC sent Coinbase a notice that violations were found on the exchange, about which an appeal to the court is being prepared. Three months later, a lawsuit was filed for operating without registration as a broker, national securities exchange, or clearing agency, as well as offering unregistered securities. The SEC categorized major altcoins such as SOL, MATIC, and ADA as the latter. The exchange responded that the assets named in the lawsuit did not meet the criteria for an investment contract.

According to Armstrong, the lack of clear operating guidelines and regulation through enforcement actions pushed the company to expand outside the United States. Thus, Coinbase has already obtained a license in Singapore.

Despite this, the exchange is not abandoning its efforts to promote ideas for cryptocurrency-friendly legislation in the US. For this purpose, it created an advocacy organization to interact with Congress.

Later, Berenberg Bank experts noted that the exchange’s lobbying efforts may be unsuccessful amid news about the use of cryptocurrencies by Palestinian terrorists. Although the amount of funds raised by groups using cryptocurrencies is greatly overestimated, as stated by blockchain analysts, US and EU lawmakers have already expressed ideas about the need for stricter crypto regulation.

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In contrast to the situation in the US, where battles between agencies and over the right to regulate the sector create uncertainty, Armstrong cited the UK with its Financial Conduct Authority (FCA), with which the exchange recently had “really productive engagements.” What makes the FCA special is that it regulates both securities and commodities, whereas in the US these powers are split between the SEC and the Commodity Futures Trading Commission (CFTC).

Armstrong also praised the approach of British Prime Minister Rishi Sunak, who is an advocate of cryptocurrencies and supports policies aimed at making the country a center of blockchain and Web 3.0 technologies. The businessman notes that this has already contributed to an influx of investment into the country. In particular, Silicon Valley’s leading venture capital fund a16z has already opened an office in London, while Coinbase itself has created around 200 high-paying jobs in the country.

Armstrong allowed the possibility of a counterclaim against the SEC in order to create a precedent in the classification of cryptocurrencies. At the same time, he hopes that Congress will act independently and adopt legislation for the industry

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