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Coinbase CEO said the team is prepared to defend itself in court if it comes to it.
It appears the Securities and Exchange Commission (SEC) cannot tear the relationship between crypto company Coinbase (NASDAQ: COIN) and financial services company JPMorgan (NYSE: JPM) asunder. While many would believe that the rising regulatory scrutiny from the Commission would affect the bond between Coinbase and JPMorgan, the companies’ alliance remains unfazed. Familiar sources also confirmed the continued agreement between the two despite the ongoing conflict.
Coinbase Continues to Bank with JPMorgan amid Regulatory Scrutiny
The crypto industry has become a major focus for the SEC, which has been cracking down on many crypto companies. Earlier this month, Coinbase CEO Brian Armstrong took to Twitter to share rumors of a possible ban on crypto staking. The CEO wrote that the Commission may be banning crypto staking for retail customers. Shortly after Armstrong’s tweets, the SEC announced that Kraken would shut down its US staking operation in addition to a $30 million settlement. The regulator claimed that Kraken did not register the offer or sale of its crypto asset staking program. In reaction to the news about Kraken and the SEC, Coin base’s shares dropped 14%. Notably, Coinbase has a staking service dubbed Earn which offers a 6% rate. According to SEC Chair Gary Gensler, crypto-staking companies must “provide the proper disclosures and safeguards required by securities laws.”
Meanwhile, Coinbase is ready to tackle the SEC on its staking services. The company’s CEO said the team is prepared to defend itself in court if it comes to it. The exchange’s chief legal officer Paul Grewal published a blog post to explain how staking cannot be classified as a security. He concluded by referring to the US Securities Act and the Howey Test.
“The purpose of securities law is to correct for imbalances in information. But there is no imbalance of information in staking, as all participants are connected on the blockchain and are able to validate transactions through a community of users with equal access to the same information.”
As Coinbase enters the defensive mode with SEC, the people familiar with the matter said the exchange would continue to bank with JPMorgan. In addition, Grewal wrote that “unnecessarily aggressive mandates” from the agency will affect US consumers. He said such actions may prevent customers from accessing crypto services in the US, hence pushing them to offshore, unregulated platforms.
NYDFS Stops Paxos from Issuing BUSD
While crypto enthusiasts are hoping for a reduced crackdown on the industry, the New York Department of Financial Services recently ordered Paxos Trust to stop issuing the BUSD. This came after the agency started an investigation into the financial institution last week. Paxos will seize the further issuance of BUSD stablecoins beginning from the 21st of February. It also plans to further honor BUSD redemptions till February 2024.
“New and existing Paxos customers will be able to redeem their funds in US dollars to convert their BUSD tokens to Pax Dollar (USDO), a regulated US dollar-backed stablecoin also issued by Paxos Trust,” wrote the company.