A Cry For Regulations: Coinbase And SEC's Wells Notice
On April 27, Coinbase founder Brian Armstrong and Chief Legal Officer Paul Grewal publicly addressed the company's Wells notice from the United States Securities and Exchange Commission (SEC) in a video released on YouTube and at the Consensus 2023 event.
What is a Wells notice?
A Wells notice is a notification from the SEC to a firm that it may face enforcement actions. Coinbase received a Wells notice on March 22, which Grewal described as "broad but fundamentally vague." In response, Coinbase executives took their case to the public and explained their position.
Coinbase's core commitment to regulatory compliance
Grewal emphasized Coinbase's core commitment to regulatory compliance, stating that the firm's business has not changed since its approval for listing on the Nasdaq stock exchange two years ago. He argued that the SEC's new view is based on the activities of FTX, which is entirely dissimilar to Coinbase.
Grewal also pointed out that Coinbase is already regulated and holds a New York State BitLicense that prohibits it from listing securities. He said that the SEC would need to create new legislation or rulemaking if it intends to expand its oversight over the industry.
Coinbase's proposal for crypto companies to register
Grewal mentioned that the SEC had asked Coinbase last summer to develop a proposal for crypto companies to register if they wish to list securities. However, the SEC discontinued the discussion before responding to Coinbase's proposal and issuing the Wells notice.
Unclear concerns from the SEC
Grewal expressed uncertainty regarding the SEC's concerns about Coinbase's activities, as the Wells notice was fundamentally vague. He said that Coinbase has always been committed to regulatory compliance and will continue to engage with regulators to ensure that it remains so.
What is Coinbase?
Coinbase is a popular cryptocurrency exchange platform that allows users to buy, sell, and trade various digital currencies, such as Bitcoin, Ethereum, and Litecoin. Founded in 2012, Coinbase is headquartered in San Francisco, California, and is available in over 100 countries worldwide.
Currently it is a publicly traded company, meaning that it has shareholders who own parts of the company. However, the founders of Coinbase, Brian Armstrong and Fred Ehrsam, still own significant stakes in the company.
Why is It regulated by the SEC?
Coinbase holds a New York State BitLicense that prohibits it from listing securities. However, on March 22, the SEC issued a Wells notice to Coinbase, indicating that it may face enforcement actions. Despite this, Coinbase's executives have publicly addressed the issue, stating that the company remains committed to regulatory compliance and that it has not changed its business practices since its approval for listing on the Nasdaq stock exchange two years ago.