By Michael Scott
Coinbase chief executive Brian Armstrong weighed on the SEC’s conduct this year, decrying that Coinbase’s push for feedback led to the mid-2023 lawsuit. The executive criticized the US regulators for handling crypto as the jump ball pointing to the ongoing legal battle the agency is embroiled in in its attempt to police the digital asset ecosystem with enforcement.
Armstrong’s comments align with the pronouncements shared by the San Francisco-based cryptocurrency platform that earned its charges despite the self-engineered pursuit for clarity with the SEC.
Coinbase Chief Executive Laments Charges Leveled by SEC
Armstrong revealed holding meetings with the SEC 30 times in the past 18 months. He laments that the meetings bore no feedback from the regulator on assets it considered securities and non-securities besides Bitcoin.
Armstrong indicated that Coinbase referenced legal arguments and technical know-how on assets listed on the exchange. The effort was futile, only for the California-based crypto exchange to receive a Wells Notice in March.
The Wells Notice served in March involves the letter drafted by the SEC informing the recipient of the Commission’s intention to levy charges. SEC would live true to the Wells Notice by charging Coinbase after three months.
Coinbase reviewed the June 6 events when the SEC charged Coinbase, alleging it operated an unlicensed securities exchange. The regulator submission captured several crypto assets it alleged were unlicensed securities yet listed by the San Francisco-based crypto exchange.
SEC claimed that Solana (SOL), Cardano (ADA), and Polygon (MATIC) are among the crypto assets classified as unlicensed as per U.S. federal law. The designation has received pushback from the projects. Coinbase refutes the charges, indicating that the tokens listed lack qualification as securities under the investment contracts criteria the regulator alleges to apply.
Armstrong defines the US digital assets industry as witnessing a turf war sparked by regulation by enforcement. The executive blames the Gary Gensler-led regulator for failing to offer clear guidance. He added that the harsh operating environment has forced viable crypto innovations to exit the US.
Armstrong opined that the absence of clear guidance arises from the turf war pitting the SEC against the Commodity Futures Trading Commission (CFTC). The aftermath is confusion and regulatory challenges borne by the crypto firms.
UK Pro-Crypto Regulatory Approach Contrasts US Pro-Enforcements Culture
Armstrong hailed the UK regulatory environment, echoing his pronouncement at the government investment summit. He indicated that the UK’s Financial Conduct Authority has been holding productive engagements with Coinbase.
He indirectly attacked the US by stating the preference for a single regulator overseeing securities and commodities. The US setting occasionally witnesses CFTC and SEC supremacy contests on who regulates certain assets. He considered such a jump ball situation that the crypto companies have witnessed in the US.
Armstrong declared that the primary factor in international expansion and foreign investment is whether the destination features regulatory clarity.
The Coinbase chief lauded the input by the UK government led by Prime Minister Rishi Sunak as pro-crypto. He indicated that the UK regulator’s actions are geared towards the country’s objective of becoming a global crypto and Web3 hub.
The pro-crypto approach demonstrated by the UK is attracting new investment, citing Andreesen Horowitz as an established London office. Armstrong indicated the office created 200 high-tech employment opportunities, a move Coinbase seeks to improve soon.
Lawmaker Dismisses SEC versus CFTC Contest as Industry-Fueled Feud
Armstrong condemned the situation in the US as dire since regulation is orchestrated via enforcement. The resulting regulatory environment becomes murky.
Armstrong indicated that failure to get clarity from the Gensler-led SEC would prompt it to seek court intervention, thereby creating applicable case law.
Armstrong expressed optimism that Congress would pass new legislation, citing two bills already on the House floor.
The Coinbase chief laments that lawmakers are drawn into endless divergence, with some opposed to the existence of a regulatory turf war. In particular, Representative Stephen Lynch from Massachusetts called the turf war an industry-fueled feud of SEC versus CFTC contest.
Lynch argued that such concerns by the crypto industry of regulatory ambiguity constitute masked non-compliance with federal laws.