On Wednesday, the Chief Executive Officer of Coinbase (COIN.O), Brian Armstrong, responded to the Chair of the United States Securities and Exchange Commission (SEC), Gary Gensler, regarding the agency’s lawsuit against the cryptocurrency exchange. He called Gensler a “outlier,” while also assuring users that their assets were secure.
On Tuesday, the SEC made allegations that Coinbase engaged in the trading of at least 13 crypto assets that are deemed to be securities and hence should have been registered. Some of these tokens are Solana, Cardano, and Polygon. Additionally, the government asserted that Coinbase was operating without a valid registration as an exchange, broker, and clearinghouse.
At a Bloomberg conference, Armstrong, an outspoken critic of the SEC who has led the charge in Washington for clearer crypto rules, stated that the company had approached the regulator about becoming registered, but Gensler gave them a “icy reception” during their first encounter. Armstrong is leading the charge in Washington for clearer crypto laws.
Gensler has maintained for a long time that the vast majority of tokens are securities and has consistently emphasized the authority of the SEC over the cryptocurrency market. The Working Group of the United States President on Financial Markets has also stated that certain coins related to fiat currencies may be considered securities.
The classification of cryptocurrency tokens as securities is a point of contention among crypto businesses, notably Coinbase, which has made numerous requests to the SEC for more transparent guidelines.
“The chair of the SEC is really an outlier,” Armstrong said, adding that several senators he had spoken to were supportive of building a clear regulatory framework for the technology. “I’ve talked to a lot of legislators,” Armstrong said.
On Wednesday, Coinbase’s stock price made a strong comeback, climbing about 3.1% to $53.2.
A spokesperson for the SEC did not want to comment on the matter.
The Securities and Exchange Commission (SEC) filed a lawsuit against the most significant cryptocurrency exchange in the world, Binance, on Monday, accusing it of selling cryptocurrency products without first registering them as securities. In addition, it was alleged that Binance had falsely inflated trade volumes, misappropriated user funds, and failed to restrict access to its platform for customers located in the United States.
Armstrong was keen to differentiate the two scenarios, which he described to CNBC as “could not be more different.”
“There hasn’t been any allegation of misappropriation of customer funds,” he continued, referring to Coinbase as an example. “In the case of Coinbase.”
Late on Tuesday evening, Paul Grewal, the chief legal officer of the company, gave an interview to Reuters in which he stated that he was “confident” that the SEC would not attempt to freeze Coinbase’s assets, as it has done in the case of Binance. He stated that the criteria that are necessary for such a seizure of assets do not apply to their situation because they do not meet the requirements.
A request for comment was sent to Binance, but they did not react right away. In a statement released on Monday, Binance made a commitment to actively defend itself against the lawsuit, which it characterized as reflecting the SEC’s “misguided and conscious refusal” to bring clarity to the cryptocurrency industry. Binance said the SEC was “refusing” to provide clarity because it “wants to protect its own interests.”
SETTLEMENT BREAKDOWN
It was not the first time that Armstrong, who had worked as a software engineer at Airbnb before co-founding Coinbase in 2012, had taken aim at the SEC. In fact, he did it twice. After the government informed Coinbase that it would sue the firm if it went ahead with a planned loan program in 2021, he accused the agency of “really sketchy behavior” in a series of tweets that he sent out that year. After that, Coinbase increased the price of the merchandise.
Coinbase made public its knowledge of an SEC investigation into its asset listing processes, staking programs, and yield-generating businesses in July of last year. According to a source familiar with the matter, attorneys for Coinbase reportedly discussed the possibility of reaching a settlement with the Securities and Exchange Commission (SEC) during the first three months of this year. The deal would have required the firm to pay a fine and would have paved the way for the company to register with the agency.
According to the source, those conversations were unsuccessful and broke down in March when the SEC made it plain that it held the stance that key components of the company’s business model were effectively illegal. The SEC informed Coinbase in a letter that it intended to initiate an enforcement action against the business within the same month that the letter was sent.
Since the beginning of last year, Coinbase has been advocating for the Securities and Exchange Commission (SEC) to develop new crypto-specific legislation. In April, Coinbase asked the United States Court of Appeals for the Third Circuit to compel the regulator to provide a response. This court issued an order on Tuesday requiring the SEC to respond to the case within one week.
Grewal stated that despite the lawsuit, Coinbase is still interested in having a conversation with the SEC about how bitcoin may be brought into the regulatory perimeter.
“If there was a chance for a real conversation, of course we would take it up, but I want to be very clear: Coinbase is absolutely committed to defending itself in court,” he added. “If there were an opportunity for a real conversation, of course we would take it up.”
