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In its response, Coinbase clearly mentioned the exchange has not engaged in any activity that violates federal securities laws. It also slammed the SEC for refusing to engage in a meaningful dialogue on crypto regulations.
On Thursday, April 27, crypto exchange Coinbase offered a fiery response to last month’s Wells Notice issued by the US Securities and Exchange Commission (SEC). Coinbase’s chief legal officer Paul Grewal clearly told the federal regulator that any kind of enforcement action against the exchange would lead to major “problematic risks” for the SEC and that the regulator would “fail on the merits”.
In clear words, Grewal stated that “Coinbase does not list, clear, or effect trading in securities”. He further added that the analysis done by the SEC staffers to justify an enforcement action “appears to rest on superficial and incorrect analogies to products and services offered by others”.
In its Wells Notice issued last month to crypto exchange Coinbase, the SEC noted that Coinbase’s spot trading, staking, custody and institutional trading businesses were at risk. Besides, the regulator’s warning means that the SEC could allege that Coinbase was offering and trading unregistered securities, thereby violating federal securities laws. In a separate statement to CNBC, Grewal said:
“At the time when we went public we had detailed discussions with the SEC about the very aspects of our business that are now – two years later – the subject of the Wells notice. Nothing has changed.”
Last month, the SEC slapped similar charges on another crypto exchange Kraken leading to a $30 million settlement. Furthermore, the SEC also forced Kraken to shut down its staking services in the US market.
SEC vs Coinbase
As said, the US SEC has been intimidating several other crypto exchanges over violations of securities laws. However, Coinbase stands firm in its position claiming no wrongdoing and adding that it has been conducting an extensive dialogue with the regulators over the last few years.
If the SEC succeeds in its charges, it could ask the crypto exchange to shut down its operations. On the other hand, executives at Coinbase have always shown the intent of engaging in a meaningful dialogue with the SEC over establishing clarity for the broader cryptocurrency market.
However, Coinbase said that despite its years-long efforts, the SEC and its staffers haven’t shown any intent in engaging in dialogue. Coinbase recently initiated legal action against the SEC for failing to provide regulatory clarity and guidance on the US crypto markets. In a word to CNBC, a Coinbase spokesperson said:
“The SEC generally does not acknowledge the existence or non-existence of any investigation unless or until charges are filed. Coinbase has never wanted to litigate with the Commission. The Commission should not want to litigate either,” Coinbase wrote in its response. “Litigation will put the Commission’s own actions on trial,” Coinbase said, and “erode public trust cultivated over decades.”