Coinbase Does Not List Securities, Execs Claim in Response to SEC’s Wells Notice

• The Chief Legal Officer of Coinbase, Paul Grewal, said that it is willing to comply with regulations, but there are no clear guidelines to act on.
• He said in a video response to SEC’s Wells Notice to Coinbase that its “core commitment to regulatory compliance has never wavered.”
• Grewal said that his company’s business model hasn’t changed in over two years since the crypto exchange went public on Nasdaq in 2021. 
• The executive believes that the recent shift in the SEC’s overview of crypto can be attributed to the multi-billion-dollar collapse of crypto firm FTX.

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Coinbase, the only publicly-listed crypto exchange in the United States, has come under heavy scrutiny from the US Securities and Exchange Commission (SEC) after the regulator issued a Wells Notice to the company, stating that the exchange is listing securities and providing exposure to “investment contracts” to American investors. On the other hand, the exchange said that it is willing to comply with regulations, but there are no clear guidelines to act on. 

The CEO and Chief Legal Officer of Coinbase, Brian Armstrong and Paul Grewal, issued a public response to the allegations of the SEC mentioned in the Wells Notice that was issued earlier this year to the exchange. The regulator stated in the notice that it might have to carry out enforcement actions against the crypto exchange.

Grewal said in the video that was addressed to the chair and commissioners of the SEC that “Coinbase’s core commitment to regulatory compliance has never wavered.” Around the same time as the video was published, Grewal was talking to an audience in Austin at Consensus 2023 regarding the Wells notice.

“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,” said the Chief Legal Officer of Coinbase. 

Grewal also added in the video that his company’s business model hasn’t changed in over two years since the crypto exchange went public on Nasdaq in 2021. The Coinbase executive stated that at the time “the SEC’s position appeared to be that the SEC lacked statutory authority to regulate businesses like Coinbase.”

The executive believes that the new outlook that the SEC has on crypto is because of the implosion of the former multi-billion dollar crypto exchange FTX under the leadership of Sam Bankman-Fried, also known as SBF in the crypto space. Grewal added that FTX was “entirely dissimilar” to Coinbase.  

He also noted that Coinbase is already a regulated exchange in the United States and has been provided a “BitLicense” in New York, which prevents it from listing securities. Additionally, the executive pointed out that his company believes that “legislation or rulemaking is needed if the SEC wants to expand its oversight over our industry.”

“We still do not know exactly what it is that we do that is of concern to the SEC,” noted Grewal. “We are committed to working within the regulatory perimeter.”

As reported earlier by Bitnation, Coinbase filed a court action in a United States federal court earlier this month in an attempt to “force” the SEC to respond to the petition that was submitted by the crypto exchange in July 2022. The petition asked the regulator to set up a regulatory framework for the crypto exchanges in the country to work with. 

Coinbase stated in the petition that “appropriately tailored regulation is essential to encouraging capital formation in the digital asset industry, protecting digital asset customers and investors, and facilitating the wider adoption of digital asset technology.”

While defending the company’s staking services earlier this year, Grewal said that they cannot be classified as securities because the rewards are not decided by the exchange but by the blockchain protocol in which the customers invest and stake tokens. 

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