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According to Coinbase CEO Brian Armstrong, the company’s legal team is well prepared to represent the crypto industry in court to get regulatory clarity.
Amid heightened crypto regulatory scrutiny in the United States, the Biden administration through the Securities and Exchange Commission (SEC) slapped Coinbase Global Inc (NASDAQ: COIN) with a legal action for listing unregistered securities. As a result, the SEC legal team will be fighting top crypto firms including Ripple Labs, and Binance in court simultaneously. The legal action against Coinbase, however, did not resonate well with the crypto community as the same agency approved the exchange’s request to go public in April 2021.
According to the SEC, Coinbase never registered its staking-as-a-service program as required by the securities laws, thus exposing investors to a lack of critical exposure and protection.
“We allege that Coinbase, despite being subject to the securities laws, commingled and unlawfully offered exchange, broker-dealer, and clearinghouse functions,” said SEC Chair Gary Gensler. “In other parts of our securities markets, these functions are separate. Coinbase’s alleged failures deprive investors of critical protections, including rulebooks that prevent fraud and manipulation, proper disclosure, safeguards against conflicts of interest, and routine inspection by the SEC.”
Coinbase Chief Legal Officer Speaks at House Committee
During the same day that the SEC filed legal action against Coinbase, the company’s Chief Legal Officer Paul Grewal appeared before a House of Representatives committee, which is currently drafting legislation to create a new framework for digital asset markets in the United States. During the hearing, Grewal noted that it was surprising and disappointing for the SEC decided to file legal action the same day of the meeting.
Moreover, Grewal highlighted that the move by the SEC to regulate the crypto industry through enforcement is not fair for American investors. As a result, Grewal told the House Committee that Coinbase will continue operating its business as usual despite the ongoing legal action.
“Despite today’s complaint we will continue to operate our business as usual,” Grewal noted.
According to Coinbase CEO Brian Armstrong, the company’s legal team is well prepared to represent the crypto industry in court to get regulatory clarity. He added that the SEC and the CFTC have issued conflicting statements regarding the crypto industry on what is a security and what is a commodity.
“Instead of publishing a clear rule book, the SEC has taken a regulation-by-enforcement approach that is harming America. So if we need to avail ourselves of the courts to get clarity, so be it,” Armstrong noted.
The $13.77 billion valued crypto exchange enjoyed a profitable first quarter, which saw its stock market rise approximately 45 percent YTD. However, COIN shares closed Tuesday trading at $51.61, down 12 percent from the day’s opening price.