Coinbase Executives, CEO Brian Armstrong and CFO Paul Grewal, fire back against the accusations by SEC in a 14-minute video. Coinbase, the world’s biggest cryptocurrency exchange, has recently come under scrutiny from the Securities and Exchange Commission (SEC).
In the video, the executives warned that if SEC moves forward with the enforcement action, the team will strongly respond back to it. CEO Brian claimed that he has been following regulatory engagement and compliance for 11 years.
“My message to the regulators and commissioner is that we’re committed to working in the regulatory perimeter. We want to see a clear market structure,” he said.
The SEC has been suing centralized exchanges over securities. CEO Brian believes the authorities lack a “clear market structure” because not all assets are crypto securities. He also suggested working together with the SEC to design a better legal framework.
The SEC criticized Coinbase‘s service, stating that it would be classified as a security, which would subject it to additional regulations. In response, CFO Paul stated that the company disagrees with the SEC’s classification and is working to address the regulator’s concerns.
Paul claimed that Coinbase doesn’t list any securities and follows the “robust” regulatory rules. He also shared that the exchange rejects almost 90% of assets that they review.
In 2021, Coinbase was declared a public company and distributed its shares to investors fairly. However, in March, the SEC sued the exchange for not following the rules.
“In the past two years, Coinbase’s business hasn’t changed in any fundamental way,” Paul said. “We’re just as committed to following the rules and engaging collaboratively with the SEC.”
He quoted Gary Gensler’s speech to Congress, where he said: “The exchanges trading in these crypto-assets do not have a regulatory framework either at the SEC or our sister agency the CFTC”.
However, when FTX collapsed, the SEC changed its stance towards the whole industry of crypto trading platforms. Paul claimed that FTX is completely different from Coinbase but the regulators aren’t fully weighing down the differences between the two.
He added that if they are calling digital assets as securities, it’s important they clearly define what can be identified as “securities.” For example, in Japan, the FSA recently added a new Amendment Law which clearly differentiates between digital assets, and tax them based on it. The American authorities have yet to reach that level of regulation.
Paul also pointed out that if the SEC had problems, they could’ve easily rejected it from going public in 2021 based on Coinbase’s S-1 filing. The exchange has been actively cooperating with the regulators to design a framework that could work for all platforms.
“We shared our views on registration framework options for months,” Paul said. But, on the eve of the meeting where SEC had promised to give them feedback, they called off the discussion. A few weeks later, the team received a broad yet vague Wells Notice.
“We still don’t know exactly what it is we do that is of concern to the SEC,” Paul said. He requested the SEC to move forward with mutual dialogue to clearly define these assets.
CEO Brian ended the video by saying that the Wells Notice is not constructive in the interests of Coinbase as well as America.
“There are many aspects of rules that aren’t clear for operating a crypto business in the US. Our petition to the SEC made those points,” he said. “We would like to continue to work with you to make a regulated market for crypto securities to be traded in the US. I think our interests are aligned in doing that.”
The team hopes that SEC won’t move towards litigation and enforcement as it could affect the crypto industry. Overall, the video was a strong defense of Coinbase’s operations and its commitment to complying with regulatory requirements.
A company that has already received approval to be listed in public suddenly received Wells Notice is quite concerning. Compared to other countries like Hong Kong or Singapore, America is still way behind in establishing a satisfactory framework for crypto businesses.
What is Wells Notice?
A “Wells Notice” is a written communication issued by a securities regulator to a party under investigation, informing them of the potential charges that the regulator is considering and allowing the recipient to provide a written statement to the decision-maker in response.
