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"Superficial, Incorrect": Coinbase Fires Back at SEC Threat

Shots fired as Coinbase and SEC's duel intensifies

Image credit: James Fitzgerald on Unsplash

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Coinbase has fired back at the US Securities and Exchange Commission's (SEC) Wells Notice.

Last month, the SEC told Coinbase that they found potential violations of security laws but when the crypto exchange asked the regulatory body to identify the specific assets in question, the SEC declined.

Multiple Coinbase products came under regulatory scrutiny, including an unidentified portion of listed digital assets, Coinbase Earn, Coinbase Prime, and Coinbase Wallet.

Read more: Coinbase Shares Fall as Exchange Prepares for Battle With SEC

On Thursday, Coinbase responded to the SEC's threat that enforcement action would pose “major programmatic risks” to the SEC that would “fail on the merits.”

“Coinbase does not list, clear, or effect trading in securities,” the company said in its response. "Ultimately, the [SEC] Staff’s analysis appears to rest on superficial and incorrect analogies to products and services offered by others, not how Coinbase’s services actually operate now or in the past"

“Coinbase has never wanted to litigate with the Commission," Coinbase added. "The Commission should not want to litigate either. "Litigation will put the Commission’s own actions on trial, erode public trust cultivated over decades, undermine incentives for market participants to engage with the Commission in good faith, and present significant risks to broad aspects of the Commission’s enforcement program."

Coinbase Chief Legal Officer Paul Grewal separately told CNBC, "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."

Coinbase vs USA

On Monday, Coinbase filed a request with the federal court to urge the regulator to provide more clarity on crypto regulations.

Coinbase sent the SEC its "petition for rulemaking" in July, which requested the Commission "propose and adopt rules to govern the regulation of securities that are offered and traded via digitally native methods, including potential rules to identify which digital assets are securities."

Read more: Coinbase, Do Kwon Seek US Courts' Help Against SEC

Grewal said in Monday's announcement that "If the SEC says no to our rulemaking petition, which it has the right to do, then Coinbase would be allowed to challenge that decision in court and explain in that formal setting why rulemaking is required."

Coinbase's recent battle with US regulators has led the firm to consider leaving the American market.

Speaking in conversation with former UK Chancellor George Osborne at the Innovate Finance Global Summit, CEO Brian Armstrong said: “Silicon Valley has a resource curse.”

Armstrong criticised the US for its approach to crypto regulation. “They have the golden goose … and yet they want to punish these things … they take it for granted and try to extract as much as they can.”

Read more: Coinbase Eyes UK, Bermuda as CEO Weighs US Exit

Coinbase is thus looking towards the UK. “The UK is our second largest market. We are not seeing regulatory clarity in the US. We may have to consider investing elsewhere. Anything is on the table, including relocating,” Armstrong said.

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