By Paul Grewal, Chief Authorized Officer
Tl;dr: Coinbase doesn’t record securities on its platform. Interval.
Now we have stated it earlier than, however given at this time’s occasions, it bears repeating.
Earlier at this time, following a Division of Justice (DOJ) investigation right into a former Coinbase worker’s misuse of confidential Coinbase info associated to itemizing choices, the Securities and Alternate Fee (SEC) individually filed securities fraud prices in opposition to this particular person associated to this wrongdoing. The SEC alleges that 9 digital property concerned are securities. The DOJ reviewed the identical details and selected to not file securities fraud prices in opposition to these concerned. As CFTC Commissioner Caroline Pham acknowledged, that is “a hanging instance of ‘regulation by enforcement’” by the SEC.
We agree with Commissioner Pham and, respectfully, 100% disagree with the SEC’s choice to file these securities fraud prices and the substance of the costs themselves. Let me clarify why.
Seven of the 9 property included within the SEC’s prices are listed on Coinbase’s platform. None of those property are securities. Coinbase has a rigorous course of to research and evaluate every digital asset earlier than making it obtainable on our change — a course of that the SEC itself has reviewed. This course of consists of an evaluation of whether or not the asset could possibly be thought-about to be a safety, and likewise considers regulatory compliance and data safety elements of the asset. To be express, nearly all of property that we evaluate are usually not in the end listed on Coinbase.
We cooperated with the SEC’s investigation into the wrongdoing charged by the DOJ at this time. However as a substitute of getting a dialogue with us concerning the seven property on our platform, the SEC jumped on to litigation. The SEC’s prices put a highlight on an necessary downside: the US doesn’t have a transparent or workable regulatory framework for digital asset securities. And as a substitute of crafting tailor-made guidelines in an inclusive and clear means, the SEC is counting on these kinds of one-off enforcement actions to attempt to deliver all digital property into its jurisdiction, even these property which can be not securities.
Simply this morning (and with no prior data of the timing of the costs mentioned), Coinbase filed a petition for rule making with the SEC calling for precise rule making so the crypto securities market has an opportunity to develop. We fear that at this time’s prices recommend the SEC has little curiosity on this most basic function of regulators.
However within the absence of a concrete digital asset securities regulatory framework from the SEC, we stay assured that Coinbase’s rigorous evaluate course of retains securities off Coinbase’s platform. We stay wanting to share our perspective with the SEC, particularly via a proper rule-making course of desperately wanted.