Crypto Community Furious
The cryptocurrency community is up in arms over the U.S. Securities and Exchange Commission’s (SEC) action against Coinbase, the leading cryptocurrency exchange in the United States. The SEC has delivered a “Wells Notice” to Coinbase, which informs a company that the agency intends to bring an enforcement action against them. The notice touches on aspects of Coinbase’s exchange, staking service called Earn, and its non-custodial wallet and follows a cursory investigation by the SEC. The notice has prompted an existential debate over the future of cryptocurrency in the United States.
The crypto community has criticized the SEC for its sudden delivery of the Wells Notice, especially after the agency allowed Coinbase, a publicly traded company, to offer staking rewards for several years. Many have called into question the regulator’s motives, with some accusing the Biden Administration of wanting to run all cryptocurrency, including the legitimate parts of it, out of the U.S.
Coinbase’s Chief Legal Officer, Paul Grewal, has expressed frustration with the SEC’s approach, stating that the company has met with the SEC more than 30 times over the past nine months, sharing details of its business to build a path to registration. During this time, the SEC did not give any feedback on what to change or how to register, and instead, the company received a Wells Notice.
Some are prepared for Coinbase to go to war with the SEC about all of this and have stated that they will eventually be on the side of Coinbase if the company were to fight against the situation. Brian Armstrong has been very vocal about his different views on crypto and securities from the SEC.
Despite facing criticism from some in the XRP community for delisting the digital currency from Coinbase Wallet last year, many expressed solidarity with Coinbase, including Chris Dixon, general partner at Andreessen Horowitz, who praised Coinbase’s commitment to complying with U.S. laws. Adam Cochran, founder of Cinneamhain Ventures, even stated he would become a customer if Coinbase fights back against the SEC.
I have zero empathy for Coinbase. They had the chance to stand with Ripple, but chose to delist #XRP thinking they would get favorable treatment.— CryptoBull (@CryptoBull2020) March 22, 2023
However, some individuals criticized Coinbase, highlighting the potential consequences of using NFTs in gaming, while others urged the U.S. to collaborate with innovators while also protecting consumers. There are concerns that NFTs could create an elitist and exclusive gaming culture, where only those who can afford to acquire them have a competitive edge. The implementation of high-stakes games where players can lose their NFTs could also lead to a pay-to-win gaming culture.
I’m not a fan of Coinbase at all but I support their fight against the SEC.— Nosh ☯︎ (@0xnosh) March 22, 2023
After approving Coinbase S1 filing two years ago which references staking 56+ times they decide to hit them with a wells notice now?
Stifling innovation is not the move. Especially in this economy. https://t.co/W48BWlho6i
More Constructive Approach
Several industry leaders, including Chris Dixon of Andreessen Horowitz, have expressed their hope that the U.S. will take a more constructive approach to collaborate with innovators while protecting consumers. Adam Cochran, the founder of Cinneamhain Ventures (CEHV), has stated that he will “vote with his wallet” and become a customer if Coinbase fights back against the agency.
The SEC has been ramping up enforcement actions against crypto companies this year, including settlements with Kraken and Paxos Trust Co. The agency has identified potential violations without being specific about them, and Coinbase has maintained that the tokens listed on its exchange are not securities and that it has a thorough vetting process.
Coinbase shares fell 12% in post-market trading in New York following the announcement of the Wells Notice. The company has stated that its products and services will continue to operate as usual for now, and it is prepared for the outcome and confident in the legality of its assets and services.
Cryptocurrency In The news
Meanwhile, the Supreme Court is hearing its first case involving cryptocurrency, which could have broader implications for consumer protection across the business landscape. The case brought by Coinbase will determine whether arbitration clauses, which are commonly found in user contracts and are intended to compel customer disputes to be handled through closed-door resolution outside of the court system, can be enforced against customers.
In conclusion, the SEC’s action against Coinbase has prompted a debate over the future of cryptocurrency in the United States and the role of regulators in the industry. The crypto community has expressed its support for Coinbase and its hope that the U.S. will take a more constructive approach to collaborating with innovators while protecting consumers. The eventual outcome of the case brought by Coinbase in the Supreme Court could also have far-reaching implications for consumer protection across the business landscape.