If the US Securities and Exchange Commission’s (SEC) Wells Notice against Coinbase makes anything clear, it’s that the agency is at war with the crypto industry. Coinbase is the poster child for the American crypto industry and has always been committed to regulatory compliance and license registration – otherwise, the exchange wouldn’t have been able to get its IPO approved either.
Nevertheless, the SEC decided to send a Wells Notice to Coinbase focusing on staking and asset listings. A Wells Notice typically precedes an enforcement action, as CEO Brian Armston said.
In fact, as Coinbase CLO Paul Grewal wrote via Twitter, the exchange has met with the SEC more than 30 times in the last nine months to find a way to register – without hearing back. When Coinbase applied to go public in 2021, the SEC granted approval. “Now they have changed their mind on what is allowed,” Grewal said.
In a blog post, Coinbase detailed what is most shocking about the Well Notice, “The SEC staff told us they have identified potential violations of securities law, but little more. We asked the SEC specifically to identify which assets on our platforms they believe may be securities, and they declined to do so.”
The crypto community is outraged at how the SEC is refusing to do its job by not creating clear rules while regulating with enforcement actions. Therefore, it seems clear: the war can only be won in court.
Fortunately, Coinbase is more than eager to fight. “So what happens next? We avail ourselves of the court system to finally start to get some clarity for the crypto industry in the U.S. Ironically, establishing some case law may be our best shot at getting the regulatory clarity that the industry deserves,” Grewal explained.
Jake Chervinsky, chief policy officer at Blockchain Association, expressed his dismay over the Wells Notice to Coinbase after the company spent “an extraordinary amount” of time and resources working in good faith to obtain regulatory clarity from the SEC. Still, Chervinsky is hopeful:
Thankfully, Coinbase is ready to fight and in a strong position to do so successfully as a matter of law. Remember, the SEC doesn’t make the law. It only makes allegations, which ultimately must be tested in the courts. Often, as here, the SEC is wrong.
Other well-known crypto industry bigwigs have a similar view. Scott Melker, The Wolf Of All Streets, claims via Twitter that Coinbase will bury the SEC in court as they have the war chest and facts on their side. Melker writes:
The judicial system has been dunking on the SEC in every available situation. Let’s go. […] This will catalyze the industry in the US in a way that the SEC is wildly unprepared for. Gary is toast.
Caitlin Long, founder and CEO of crypto-friendly Custodia Bank, adds:
IT SHOULD BE CRYSTAL CLEAR BY NOW that the Biden Administration wants all crypto (even the legit parts of it)–run out of the U.S. […] The SEC’s remit is investor protection. How did it protect investors to let a company IPO if it was violating securities laws?
XRP community advocate Jeremy Hogan also notes that the SEC is no longer an independent agency that makes rules based on the law, but is a “political enforcement arm of the government and its views,” adding “Only the Courts can save us now.”
Author Andrew Samuel expressed his optimism as well:
Reminder: a couple weeks ago the SEC got picked apart by Grayscale attorneys and an appellate panel in the DC Circuit. You can bet that Coinbase is set to do the same in the coming months/years. Those two firms, whatever you think of them, are now the torchbearers of stopping the death of crypto in the US.
At press time, Bitcoin traded at $27,630, digesting yesterday’s news.
Featured image from iStock, chart from TradingView