Coinbase execs respond to SEC’s Wells notice in person and on video

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Exec­u­tives of cryp­tocur­ren­cy exchange Coin­base took their company’s reg­u­la­to­ry issues to the pub­lic on April 27, with chief legal offi­cer Paul Gre­w­al speak­ing at Con­sen­sus 2023 and appear­ing with CEO Bri­an Arm­strong in a video released on YouTube.

The appeal was in response to a Wells notice received by the firm, a noti­fi­ca­tion by the Unit­ed States Secu­ri­ties and Exchange Com­mis­sion (SEC) that it may intend to car­ry out enforce­ment actions against it.

“Coinbase’s core com­mit­ment to reg­u­la­to­ry com­pli­ance has nev­er wavered,” Gre­w­al said in the video, which was addressed to the chair and com­mis­sion­ers of the SEC.

At approx­i­mate­ly the same time as the video appeared, Gre­w­al was talk­ing to an audi­ence in Austin at Con­sen­sus 2023, where he said:

“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.” 

In the video, Gre­w­al argued that Coinbase’s busi­ness has not changed in the two years since it was approved for list­ing on the Nas­daq stock exchange. At that time, Gre­w­al said “the SEC’s posi­tion appeared to be that the SEC lacked statu­to­ry author­i­ty to reg­u­late busi­ness­es like Coinbase.”

Gre­w­al attrib­uted the SEC’s new view to FTX. He quot­ed SEC chair Gary Gensler as say­ing “I feel that we have enough author­i­ty, I real­ly do, in this space.” FTX was “entire­ly dis­sim­i­lar” to Coin­base, Gre­w­al added. 

Coin­base is already reg­u­lat­ed, Gre­w­al said, and men­tioned it has a New York state “BitLi­cense” that pro­hibits it from list­ing securities.

“We believe that leg­is­la­tion or rule­mak­ing is need­ed if the SEC wants to expand its over­sight over our indus­try,” Gre­w­al said. The SEC asked Coin­base last sum­mer to devel­op a pro­pos­al for cryp­to com­pa­nies to reg­is­ter if they want to list securities. 

The SEC dis­con­tin­ued that dis­cus­sion before respond­ing to Coinbase’s pro­pos­als and a few weeks before the issuance of the “broad but fun­da­men­tal­ly vague” Wells notice. “We still do not know exact­ly what it is that we do that is of con­cern to the SEC,” Gre­w­al said.

Relat­ed: Coin­base CEO calls for action in elect­ing pro-cryp­to law­mak­ers fol­low­ing SEC Wells notice

Arm­strong talked about his deci­sion to found the com­pa­ny and its ear­ly days. He also said: 

“We are com­mit­ted to work­ing with­in the reg­u­la­to­ry perimeter.”

The com­pa­ny does not list secu­ri­ties, he said. He added that the com­pa­ny thor­ough­ly vets its offer­ings and rejects “some 90%” of the assets they review.

Arm­strong also reit­er­at­ed that Coin­base is pre­pared to go to court to defend its posi­tion. How­ev­er, “it doesn’t have to come to that. We wel­come a true dia­log about a work­able path for­ward for our industry.”

Coin­base received a Wells notice, which usu­al­ly warns of an impend­ing SEC enforce­ment action, on March 22.

Mag­a­zine: Cryp­to reg­u­la­tion: Does SEC Chair Gary Gensler have the final say?

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