The head of Ripple, Brad Garlinghouse, said that the warning received from the SEC placed Coinbase in a situation similar to his own. He stressed that the regulator “continues the war on crypto,” and hinted at potential cooperation between the two organisations.
Thankfully today many recognize the havoc caused by regulation by enforcement. We’re ready to work with responsible actors, pro-innovation members of Congress, and others in paving a path to clarity and certainty with US regulators. 2/3
— Brad Garlinghouse (@bgarlinghouse) September 8, 2021
“If you want to go fast, go alone. If you want to go far, go together,” wrote Garlinghouse.
Ripple’s chief legal officer, Stuart Alderoty, also voiced support for the bitcoin exchange. He noted “clear regulatory frameworks” in jurisdictions such as the United Kingdom, Singapore and Japan, which foster innovation. In his view, the United States has a diametrically opposite situation.
Some (UK, Singapore, Japan, etc) have clear frameworks for innovation to flourish w/ consumer & market protection, others with sandboxes for safe collaboration between innovators & regulators. How did the US end up with secret regulatory inquisitions? 2/2
— Stuart Alderoty (@s_alderoty) September 8, 2021
“We’re told to cooperate in good faith with the SEC… and what do we get? Coercive actions (or threats of them) without any clarity. Their preferred method is intimidation from a position of power and inconsistent application of vague rules — ultimately harming consumers and markets,” Alderoty said.
In June, Coinbase announced crypto-savings accounts called Lend. The company said it had been actively engaging with the SEC about launching the product for the past six months.
However last week the regulator warned a Bitcoin exchange of potential legal action in the event of the product’s launch. Coinbase stressed that the Commission has not explained why it views Lend as a security.
Jerry Brito, director of Coin Center, called the SEC’s move petty. He said Coinbase should release the product and engage in a direct confrontation with the regulator.
2/ Coinbase should go to court because the alternative is that the SEC will enforce against a small provider, settle with them out of court, and hold up the scalp as guidance. Enough with “guidance.” Howey and Reves are judge-made law. We need court decisions to get clarity here.
— Jerry Brito (@jerrybrito) September 8, 2021
“I know it’s easy for me to say, but Coinbase should move forward and launch its product, allowing the SEC to file suit and go to court. Let the regulator present its arguments, and let the judge decide whose side the law is on,” Brito wrote.
He added that the alternative is that the Commission initiates a case against a small player, settles the dispute pre-trial, and then “will use its scalp as guidance.” Brito stressed that court decisions are needed to clarify the industry’s position.
Billionaire Mark Cuban shares a similar view. He noted that it’s better that “they [Coinbase] take on the SEC, rather than the SEC go after a small decentralized entity and quickly obtain a ruling that becomes the law for the DeFi sector.” The span above remains: DeFi.
Which is why it’s important for @coinbase to be aggressive in their engagement with the SEC. It’s better for the industry that they take on the SEC rather than the SEC go after a small decentralized entity and get a quick judgement that becomes the law of the land for DeFi.
— Mark Cuban (@mcuban) September 8, 2021
In response to their words, Kraken chief Jesse Powell noted that the clash with the SEC could yield Coinbase “astronomical” fines. He also cautioned that a judge might not be able to grasp the issues, and regulators would retaliate.
1/ Problem with going ahead now is fines/penalties can be astronomical. Will a judge understand the complex issues and side against the government? Will SEC retaliate? Refusal to discuss merits is just more leverage to force a settlement/shutdown. https://t.co/g2uU1tg43o
— Jesse Powell (@jespow) September 8, 2021
“We won’t say why we think your product is illegal, but we’ll say you have no path to legalize it. If you disagree, go ahead and see what happens.” The SEC is not the only regulator playing this game. That tactic is becoming standard practice because it works, Powell said.
Kraken’s chief added that regulators’ actions will leave global competitors of U.S. firms to take the initiative. He urged Congress to take action.
In December 2020, the SEC charged Ripple and its executives with unregistered sale of securities disguised as XRP tokens worth $1.3 billion. The regulator later amended the suit, focusing on the actions of Brad Garlinghouse and Chris Larsen.
In September 2021, the crypto-lending platform BlockFi said that the New Jersey Bureau of Securities moved the effective date for prohibiting the company from opening new BlockFi Interest Account (BIA) accounts for state residents from 2 September to 30 September.
Regulators in Alabama, Texas and Vermont also filed similar claims against BlockFi.
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