News of the US Securities and Exchange Commission’s action against Coinbase, the number one cryptocurrency exchange in the United States, spread like wildfire through the crypto community, sparking an existential debate about what it could mean for cryptocurrency in the United States.
“It should be crystal clear by now that the Biden administration wants all crypto – even the legit parts of it – to come from the US,” tweeted Custodia Bank founder and CEO Caitlin Long. See also yesterday’s White House economic report, which dipped all financial innovation while embracing the “stability” of traditional banks.”
Long and others questioned the SEC’s sudden delivery of a so-called “Wells Notice” after it allowed Coinbase, a publicly traded company, to offer multi-year staking rewards and only now threatened to sue Coinbase over claims by the offering unregistered securities.
“The past 9 months [Coinbase] met with the SEC more than 30 times and shared details of our company to build a path to filing,” wrote Paul Grewal, Chief Legal Officer at Coinbase. “During this time, the SEC has not really provided any feedback on what to change or how to register. Instead, we received a notice from Wells today.
A Wells notice is a notice from the SEC informing a company that the agency intends to bring an enforcement action against them.
“Since day one, @coinbase has invested heavily to fully comply with US laws, even when it forced them to slow down or lose a competitive edge over other exchanges that chose to take shortcuts,” wrote Chris Dixon, general partner at Andreessen Horowitz.
“The US has a strong history of fostering innovation, and regulators have played a key role in setting clear rules and prosecuting bad actors,” Dixon continued. “We hope the US will take a more constructive approach to working with innovators while protecting consumers.”
Many expressed solidarity with Coinbase, with Cinneamhain Ventures (CEHV) founder Adam Cochran saying he will “vote with my wallet” and become a client – if Coinbase fights back against the agency.
While many were quick to call the SEC, some took the opportunity to criticize the company, including many in the XRP community who were still hurt by Coinbase removing XRP from the Coinbase Wallet last fall.
Ripple Labs has been embroiled in a lawsuit with the SEC since December 2020, when the agency accused the company, whose founders launched XRP in June 2012, of misleading investors and raising $1.3 billion in unregistered securities.
“I doubt I will ever understand how the SEC can sign off on @coinbase being publicly listed and then raise all these issues,” tweeted lawyer Bill Morgan. “Just forget about crypto, how is the SEC protecting Coinbase shareholders with this horrible behavior?”
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