On April 27, executives of cryptocurrency exchange Coinbase went public with their company’s regulatory issues, with chief legal officer Paul Grewal speaking at Consensus 2023 and CEO Brian Armstrong appearing in a YouTube video.
The firm filed the appeal in response to a Wells notice, a notification from the United States Securities and Exchange Commission (SEC) that it may intend to take enforcement action against it.
“Coinbase’s core commitment to regulatory compliance has never wavered,” Grewal said in the video, which was directed at the chair and commissioners of the SEC.
Grewal was speaking to an audience in Austin at Consensus 2023 around the same time that the video was released, and he stated:
“We are literally sitting up here on stage asking for regulation, asking for rules, asking for a framework that makes sense for our particular technology so that we can be registered.”
Grewal argued in the video that Coinbase’s business has not altered in the two years since its listing on the Nasdaq stock exchange was approved.
Grewal stated at that time that “the SEC’s position appeared to be that it lacked the statutory authority to regulate businesses like Coinbase.”
Grewal attributed FTX to the SEC’s new perspective. He cited SEC chairman Gary Gensler as saying, “I truly believe that we have sufficient authority in this space.” Grewal added that FTX was “entirely dissimilar” to Coinbase.
Grewal stated that Coinbase is already regulated and that its New York state “BitLicense” prohibits it from listing securities.
Grewal stated, “We believe that legislation or rulemaking is necessary for the SEC to expand its oversight over our industry.”
Last summer, the SEC requested that Coinbase devise a proposal for crypto companies to register if they wish to list securities.
Before responding to Coinbase’s proposals and a few weeks before issuing the “broad but fundamentally vague” Wells notice, the SEC terminated this discussion.
Grewal stated, “We still do not know precisely what we do that is of concern to the SEC.”
Armstrong discussed his decision to establish the company and its early years. He stated that:
“We are committed to working within the regulatory perimeter.”
The company does not list securities according to him, the company rejects approximately 90 percent of the assets it evaluates.
Armstrong reaffirmed that Coinbase is willing to defend its position in court. However “it need not come to that.” We embrace a genuine dialogue regarding a viable future for our industry.”
On March 22, Coinbase received a Wells notice, which typically forewarns of an impending SEC enforcement action.