Coinbase CEO complains about lack of feedback from the SEC

Over a year and a half, the Coinbase team met with representatives of SEC 30 times, but did not receive a concrete answer about whether certain assets are securities. In an interview with Decrypt, Coinbase CEO Brian Armstrong said.

Relying on “weighty legal arguments” and external expert reports on cryptocurrencies listed on the platform, the company did not obtain specifics. The agency made an exception only for Bitcoin, he added.

In March, the organisation received a notice about an investigation into the listing procedure on the platform and its products — Coinbase Prime, Coinbase Wallet and the staking service Coinbase Earn, the top executive lamented.

On June 6, the SEC filed a civil suit against the firm.

The Commission accused the company of an unregistered offering of securities in the form of a number of tokens and of illegally combining three functions — as broker, exchange and clearinghouse — that are normally separated in traditional markets. The Earn program also came under the regulator’s scrutiny.

On June 29, in response to the suit, the exchange accused the SEC of overreach. According to platform representatives, citing the Howey test, the assets listed in the complaint are not investment contracts and therefore cannot be classified as securities.

The exchange refused to change its business model because of the Commission’s suit.

According to Armstrong, such an enforcement-driven regulatory environment and the lack of clear rules pushed the organisation to operate outside the United States to conduct business.

CEO Brian Armstrong said that U.S. regulators view cryptocurrency as a “controversial ball” in the ongoing battle over which agency should regulate the market. The ongoing “fight over turf” between the SEC and the CFTC is creating regulatory headaches for all firms in the industry, Armstrong noted.

The executive compared the situation to Britain, where the functions of both agencies are consolidated under the FCA.

“That is not a problem there. The main thing we are aiming for with regard to international expansion and investment is regulatory clarity,” he stressed.

Armstrong said that in the absence of clarity from the SEC, the company is compelled to go to court to set a precedent. He also expressed hope for Congress to back new regulatory acts. The CEO noted that the House of Representatives is currently considering two bills.

In June, the company said that for many years it had complied with all regulatory requirements and had repeatedly sought direct guidance from the agency on the enforcement of federal securities laws concerning the crypto industry.

In a separate document, the exchange said it had been denied due process and potentially violated the doctrine of the “major questions” by the agency. The company asked to set a seven-week schedule for its motion, the regulator’s objections, and its response to it.

Earlier in October, during hearings in the SEC’s case against Coinbase, representatives argued that cryptocurrencies lack intrinsic value.

Following the hearing, the judge rejected the agency’s request for a summary judgment. The motion was in response to the platform’s appeal to dismiss the Commission’s suit.