The Coinbase market stocks dropped about 10% in value after the company received a Wells notice from the SEC (U.S. Securities and Exchange Commission) on Wednesday.
Wells Notice: It is a formal notice from the SEC informing a recipient that the agency is planning to bring enforcement actions against them.
Coinbase received a Wells notice from the SEC. After years of asking for reasonable crypto rules, we're disappointed that the SEC is considering courts over constructive dialogue. But if courts are required, so be it. We'll defend the rule of law. 1/15 https://t.co/MXpc0RhNj4
— paulgrewal.eth (@iampaulgrewal) March 22, 2023
The SEC’s civil complaint earlier today is just the latest example of actions it has taken against well known players in the blockchain and crypto space. We believe the complaint lacks merit, and in the meantime will continue building the most decentralized financial system.
— H.E. Justin Sun 孙宇晨 (@justinsuntron) March 23, 2023
Not to mention that a month ago, the SEC fined Kraken exchange $30 Million for its staking program. Isn’t this war on Crypto trading platforms escalating far too quickly?
In response to this, Coinbase’s Chief Legal Officer Paul Grewal said: “Until this settlement, the Commission had not conveyed that it might consider staking services to constitute an investment contract and therefore a securities offering requiring registration with the SEC.”
He continued: “And the SEC had not previously made this position known despite ample opportunity to engage the crypto industry and its participants with its concerns.”
Alas, the crack-down saga continues!
Coinbase And SEC Saga
Back in July, Coinbase filed a petition to the SEC asking it to begin a public rulemaking process to clarify which digital assets it considers to be securities. Basically, they’re calling for the development of new rules and regulations for this fairly new asset class.
We are witnessing a protracted legal fight. Since Coinbase is very clear that they want to defend its position. While the SEC is not having any of it…
A Decrypt source close to the Coinbase leadership said that the latter is “frustrated” that the SEC has allowed American investors to participate in crypto for years before “suddenly deciding to pull the rug out.”
The SEC sticks to its ruling that many of the tokens and products offered by crypto companies are considered securities. So, trading platforms need to register with the agency.
Coinbase Receives Wells Notice From SEC
On Wednesday, Coinbase released a blog post written by CLO Paul Grewel entitled “We asked the SEC for reasonable crypto rules for Americans. We got legal threats instead.” Ouch…
In detail, Coinbase said that the Wells notice they received from the SEC “does not provide a lot of information for us to respond to. The SEC staff told us they have identified potential violations of securities law, but little more.”
It’s worth noting that Coinbase CEO Ben Armstrong called out the SEC for allowing the company to go public 2 years ago disregarding the 57 references to staking in their asset listing process…
2/ Two years ago the SEC reviewed our business in detail and approved Coinbase to go public. Our S1 clearly explained our asset listing process and included 57 references to staking. Coinbase runs a rigorous asset review process and has rejected more than 90% of assets that have…
— Brian Armstrong (@brian_armstrong) March 22, 2023
Without a doubt, the crackdown on crypto in the U.S. will continue to have huge repercussions on the whole sector. Coinbase is already looking to operate in friendlier jurisdictions, check out that story here!
How will the rest of the year play out? And what will Crypto firms do in response? We’ll have to wait and see.
As always, stay tuned for more!