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In a heated confrontation between the biggest US cryptocurrency exchange and a potent Washington regulator, Coinbase Global’s (COIN) CEO said on Thursday that a warning his business received from the Securities and confrontation Commission “is not constructive” and “not good for America.”
Brian Armstrong’s video message, which was posted on Thursday, was a part of Coinbase’s bigger public response to receiving a Wells Notice last month. The SEC staff had reached a “preliminary determination” to suggest an enforcement action for violations of federal securities laws, according to the notification.
A letter that Coinbase submitted to the SEC in response to the Wells notification was also made public on Thursday. The SEC staff “contends that Coinbase has operated illegally since at least 2018,” according to Coinbase in the letter, but the agency’s legal theories are “flawed and untested.” A SEC enforcement action, according to the document, “would present major programmatic risks to the commission” and “would fail on the merits because Coinbase does not list, clear, or effect trading in securities.” Shares of Coinbase were unchanged on Thursday. They have increased by more than 53% since the start of January but are still down by 82% from their first public offering in April 2021.
The fight in Washington to control the bitcoin market is being fought between Coinbase and the SEC
Gary Gensler, the agency’s chair, has urged cryptocurrency exchanges to register. The SEC has also taken 14 enforcement actions against cryptocurrency businesses and people since the beginning of January. The SEC and other exchanges have also clashed in the past. They include Kraken, the second-largest cryptocurrency exchange in the nation, which, after being accused of offering the sale of unregistered securities through its crypto staking program, reached a $30 million settlement with the SEC.
Coinbase has stated that it would resist any action taken against this service and that it has a staking program with rules that are different from those of the Kraken program. In a letter to the agency, the SEC said that its staff “contends that Coinbase’s staking services are investment contracts.”
Two weeks before the Securities and Exchange Commission (SEC) launched an enforcement action against the company for failing to register as a national securities exchange, another exchange, Bittrex, announced it would shut down its U.S. operations in late March.
Armstrong declared in his video from last night that he was ready to take the SEC to court. The corporation was prepared to appear at the SEC’s office at any time to establish a viable future for the cryptocurrency industry in the US, according to his chief legal officer, who also made an appearance in the video.
The SEC’s threat of legal action, according to Coinbase, “appears intended to pressure” the firm into accepting the agency’s position that all digital assets on the Coinbase platform are securities. This was stated in the company’s written response to the SEC. It claimed it would necessitate a redesign of its business strategy and Coinbase said
“Neither of those objectives is supported by law or within the bounds of the commission’s authority,”
Today, to provide greater transparency in our long-standing engagement with the SEC, we are sharing our response to the Wells notice we received last month. https://t.co/aquuWmxmRM
— Coinbase 🛡️ (@coinbase) April 27, 2023
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