Coinbase CEO Responds to SEC Lawsuit

Coinbase CEO Responds to SEC Lawsuit – Brian Armstrong, the CEO of Coinbase, has responded to the lawsuit brought by the U.S. Securities and Exchange Commission (SEC) against his cryptocurrency exchange. The SEC has accused Coinbase of operating its crypto asset trading platform without proper registration as a national securities exchange, broker, and clearing agency. 

Additionally, Coinbase is alleged to have sold unregistered securities through its staking-as-a-service program. In light of these charges, Brian Armstrong, the CEO of Coinbase, used Twitter to publicly discuss the lawsuit. The securities regulator charged Coinbase with “operating its crypto asset trading platform as an unregistered national securities exchange, broker, and clearing agency,” as well as selling unregistered securities “in connection with its staking-as-a-service program.”

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Armstrong tweeted: “Regarding the SEC complaint against us today, we’re proud to represent the industry in court to finally get some clarity around crypto rules.” The Coinbase executive proceeded to outline a number of factors affecting his exchange’s alleged securities law violations. He detailed: “There is no path to ‘come in and register’ — we tried, repeatedly — so we don’t list securities. We reject the vast majority of assets we review.”

Coinbase similarly stated in March, after it received a Wells notice from the SEC, that it tried to register with the regulator but the securities watchdog “will not let crypto companies ‘come in and register.'” Moreover, in his tweet on Tuesday, Armstrong highlighted the divergent views of the SEC and the CFTC, stating that they have conflicting positions regarding the definition of securities and commodities. 

A significant point of contention between the two regulatory bodies is the categorization of ether (ETH). While SEC Chair Gary Gensler asserts that all cryptocurrencies, except for bitcoin (BTC), should be considered securities, CFTC Chairman Rostin Behnam has consistently maintained that the second-largest digital currency qualifies as a commodity. Emphasizing the lack of regulatory clarity in the crypto space, the Coinbase boss stressed: “This is why the U.S. Congress is introducing new legislation to fix the situation, and the rest of the world is moving to put clear rules in place to support this technology.”

“Instead of publishing a clear rule book, the SEC has taken a regulation by enforcement approach that is harming America. So if we need to avail ourselves of the courts to get clarity, so be it,” the Coinbase CEO added. Armstrong also noted: “The SEC reviewed our business and allowed us to become a public company in 2021.” However, several people have pointed out on Twitter that the lawsuit clearly states that “Declaring effective a Form S-1 registration statement does not constitute an SEC or staff opinion on, or endorsement of, the legality of an issuer’s underlying business.”

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After the securities watchdog announced its action against Coinbase, many people took to social media to slam the SEC for regulating the crypto industry by enforcement. Senator Bill Hagerty (R-TN) wrote: “The SEC is weaponizing their role to kill an industry. Allowing a company to list publicly and then stonewalling their attempts to register is indefensible.” Senator Cynthia Lummis (R-WY) opined: “The SEC has failed to provide a path for digital asset exchanges to register, and even worse has failed to provide adequate legal guidance on what differentiates a security from a commodity.”

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