The crypto-verse was shocked late Wednesday when news broke that the US-based crypto exchange of Coinbase had received a Wells Notice from the Securities and Exchange Commission. A Wells Notice warns a company that the regulatory body has identified potential violations of existing securities laws and will likely proceed with a lawsuit regarding the same.
Coinbase Responds to the SEC’s Wells Notice
Coinbase, through its Chief Legal Officer Paul Grewal, has since responded to the Wells Notice in a blog post, stating that the crypto exchange had, attempted to engage the SEC to no avail. Mr Grewal said:
Today’s Wells notice also comes after Coinbase provided multiple proposals to the SEC about registration over the course of months, all of which the SEC ultimately refused to respond to.
Mr Grewal added that Coinbase had met the SEC over thirty times in nine months and had requested the regulator to provide feedback on proposals the exchange had submitted about how the crypto industry could be regulated in the United States. He explained:
Regulatory uncertainty in the crypto industry is getting worse. Instead of developing a regulatory framework for crypto, the SEC is continuing to regulate by enforcement only.
We recently explained in an amicus brief the lack of guidance for crypto companies to follow. Nevertheless, we have continued to try and engage with the SEC.
In addition to our attempts to develop a registration path, we have repeatedly, formally asked the SEC to engage in rulemaking for our industry.
Even the Courts are Questioning the SEC’s Inconsistent Positions
Furthermore, Mr Grewal pointed out that the SEC’s regulation through enforcement was also baffling the courts and judges. He explained:
Even courts are questioning the SEC’s inconsistent positions and lack of guidance to the industry. Federal Bankruptcy Judge Michael Wiles in the recent Voyager case shared his findings in a ruling against the SEC that makes clear that the SEC is on shaky ground when it comes to the Commission’s recent views of cryptocurrencies being a security.
He then cautioned that regulators and Congress needed to find common ground in providing direction to regulating crypto before it was too late.
© Solana Daily Brief, Inc. All Rights Reserved. This article is for informational purposes only. It is not to be used as legal, tax, investment, financial, or other advice.If our regulators cannot agree on who regulates which aspects of crypto, the industry has no fair notice on how to proceed. Against this backdrop, it makes no sense to threaten enforcement actions against trusted public companies like Coinbase who are committed to playing by the rules.
It makes even less sense to threaten enforcement actions unless an industry participant concedes that non-securities can be regulated by the SEC. That is for Congress to decide.