[polygamous_bat]

SEC is an enforcement agency, their job is not to be buddies with startups to figure out what is crime and what is not. Coinbase can hire lawyers for that until they are certain they can defend themselves in court. We live in a rule of law, after all.

It's like the cartel asking "clear guidance" from the DEA about what exactly is and is not an illegal drug that can be pushed on the street, and then complaining that they won't sit at the table and discuss the legality of fentanyl. If you want to be in this business, lawyers should be your _primary_ expense, and make sure you hire enough to be confident that you can defend your practices.

[Plasmoid]

Just no.

Rules and laws aren't supposed to be a puzzle you argue about via $1000/hr lawyers. They're meant to be a framework to achieve policy goals. It is 100% reasonable to ask the other side what their opinions on things are.

If they don't reach out to the regulators then people complain that tech is just trying to skirt the rules again.

[polygamous_bat]

> Rules and laws aren't supposed to be a puzzle you argue about via $1000/hr lawyers.

Laws are living things that must always be up for interpretation. This is the sole reason we have courts instead of two parties writing their arguments out into a formal language and feeding them into a theorem prover to see who is right.

And good news, most of the cases they are not! NASDAQ is a public company, you can find out how much they spend every quarter on lawyers. I can tell you that their legal expenses would be smaller than Coinbase's.

Why? Because Coinbase _chose_ to operate in a place where the legal grounds were not quite clear. They profited from the lack of regularity clarity in their early years. Now that the regulations are solidifying in directions that they don't like, they're shedding crocodile tears because, guess what, doing shady business is getting more legally expensive than it is profitable for them. Thankfully, laws are not written solely to maximize profits for private corporations, or protect the profits that they made during times of unclear regulations.

[TimJRobinson]

What is the USA trying to achieve though? If you want innovation to continue in the USA you can't expect companies to wait decades until the government has decided what is allowed and what isn't, they're just going to setup in other countries instead.

The USA was founded on freedom and the ability for people to innovate and create, now it's becoming a place many companies avoid because of a hostile government and this is going to be disasterous for the future wealth of the country.

Coinbase points out in the post that it's been much easier to operate in every other country than the USA.

[polygamous_bat]

> If you want innovation to continue in the USA you can't expect companies to wait decades until the government has decided what is allowed and what isn't, they're just going to setup in other countries instead.

Innovation like South Korea's Terra Luna, Bahama's FTX, and (region unspecified)'s Binance? What would the US do without such "innovation", the horrors!

> The USA was founded on freedom and the ability for people to innovate and create.

Including creative legal solutions that circumvent laws, I assume? I have been involved in an early crypto project in the past, and the way the "token"s are created is by first making them as digital securities, and then adding enough "utility" to give it plausible deniability under the Ethereum defense (something with enough utility may not be a security.) This process generally takes multiple rounds of back-and-forth between the "devs" and the lawyers. However, these tokens act like securities, people buy them as if they're securities, and they are dumped on the market by early investors and devs like they are securities. Unfortunately, it's not fooling people anymore, and SEC can actually take steps on it.

> Coinbase points out in the post that it's been much easier to operate in every other country than the USA.

"Much easier to dump fake securities on the public elsewhere" is probably a feature of the USA and not a bug. I'm glad it is the case.

[worrycue]

> you can't expect companies to wait decades until the government has decided what is allowed and what isn't

I think if it’s not outlawed then it’s allowed. In this case, they should probably hire lawyers to work out if what they are doing is outlawed and listen to their counsel’s advice … or don’t.

> Coinbase points out in the post that it's been much easier to operate in every other country than the USA.

They are free to leave.

[coldtea]

>It's like the cartel asking "clear guidance" from the DEA about what exactly is and is not an illegal drug that can be pushed on the street, and then complaining that they won't sit at the table and discuss the legality of fentanyl.

Fentanyl is clearly illegal to sell in the street, and this information is available and codified into law. So this is a bad example to use to argue that Coinbase don't have a point.

DEA and the law in general should (and indeed does) provide clear guidance as to what substances are illegal and which are not, and even whether a particular novel substance is legal or not.

[polygamous_bat]

> Fentanyl is clearly illegal to sell in the street, and this information is available and codified into law.

Fentanyl was invented sometimes around the 1960s, and cocaine at some point was prescribed liberally by doctors. Lot of new inventions are immediately not "clearly legal or illegal" from the get go. And from where I stand (and very likely, SEC stands), it is also quite clear that unregistered token sales should be illegal. If Coinbase wants to build a business on top of it, they better have lawyers ready to argue why it should be legal. Or, they can wait until there is clear laws and regulations, which necessarily evolves slower than start-ups.

Coinbase can't profit from regulatory arbitrage and then turn around and complain that there are no clear regulations. If there were, Coinbase would have much thinner margins because there would be many more exchanges doing exactly what they do but better. What is happening right now is Coinbase mistaking themselves for an "innovative tech" company when they were primarily an "innovative legal interpretation" company, and crying about the government when they got caught with their pants down.

[throwawaymaths]

I'm not sure that is the analogy you want -- You do understand Fentanyl is a legal drug with legitimate uses? If Coinbase claims to want to be a doctor, then by your analogy the DEA is deliberately being unclear to trap doctors. Which, lol, is something that the DEA is known to have done.

In the US there should be an expectation that if a regulatory agency is going to regulate it must have clear and unambiguous rules, and have enforcement policy documented and reviewed. Anything short of that is just a recipe for abuse.

To be clear, all sorts of regulatory agencies do tons of shenanigans, and this is low on the list. But still. We can do better.

[polygamous_bat]

> If Coinbase claims to want to be a doctor, then by your analogy the DEA is deliberately being unclear to trap doctors. Which, lol, is something that the DEA is known to have done.

No, SEC is telling Coinbase to register the securities (aka tokens that walk like securities and quack like securities) that they are offering. Just like it's legal to sell fentanyl with proper medical and pharmaceutical licenses, it is also legal to register your tokens as security and follow all the security sales regulations. However, Coinbase doesn't like that because it cuts into their profit margins, just like the cartel doesn't like registering as a medical organization because it will limit their profits.

[crystaln]

Not true. The SEC is regulatory agency and they are in fact in charge of providing regulations and guidance.

https://www.sec.gov/investment/im-guidance-updates

[jdminhbg]

> Coinbase can hire lawyers for that until they are certain they can defend themselves in court.

This is exactly what they’re doing. You think they just fired off some press releases in response like some kinda half-informed HN comment?

[JeremyBanks]

Yes, that’s clearly been their entire business MO from day one.

[digitaltrees]

I think your analogy is interesting but doesn’t the government list a scheduled of specific drugs and their classification? So applying your analogy would mean the SEC would list specific crypto on a schedule based on what type of security/commodity/exempt asset schedule they are governed by.

I also think government should work to promote certainty and treat good faith efforts from citizens and companies to get clarity with mutual good faith.

[polygamous_bat]

> I think your analogy is interesting but doesn’t the government list a scheduled of specific drugs and their classification? So applying your analogy would mean the SEC would list specific crypto on a schedule based on what type of security/commodity/exempt asset schedule they are governed by.

Yes, because all drugs that can be sold to the public have to apply for FDA approval first, and wait until their entire procedure is vetted. If you think cryptobros are willing to sit there and wait for SEC approval on their tokens that they pump and dump on the public we must be living in two different worlds.

[fnordpiglet]

The SEC is both a rule making and an enforcement agency. They are also a wee bit dysfunctional of late.

[codehalo]

That's because they should not be regulating cryptocurrencies, and neither should the CTFC. It's a new asset class with very dynamic properties. Wouldn't it be better for congress to just create a new agency to handle it?

[woodruffw]

Every time you derive a financial instrument, you produce a new asset class. That doesn't make the instrument or its derivative not a security; the definition of "security" impinges regardless.

[fnordpiglet]

There are a lot of dynamic securities and instruments out there. The dynamism isn’t a property considered. In fact the complexity of an instrument makes it get especially close scrutiny. But the primary thing that’s driving scrutiny is scale of public impact. It’s hard to say crypto is a fringe asset class, or that the public isn’t harmed by lack of regulatory frameworks. You can’t look at FTX, or the other stories of millions of people being soaked by con artists and poorly managed controls. The more crypto becomes a public commodity, or the effects of crypto trading impacts the public indirectly through systemic instability, the more strident the regulatory actions will become. Frankly the market participants created the situation through their flagrant inability to keep their hands in their own pockets.

[danaris]

So, what do you expect to happen? Cryptocurrency companies should just be allowed to run around doing whatever the hell they like until Congress, which is clearly dysfunctional ever since the Republican Party made it their mission to prevent the Democratic Party from doing anything ever again, manages to get some kind of regulation out? And how long do you expect that to take?

The only real alternative seems to be "no one is allowed to do anything with cryptocurrency until there are clear regulations around it."

I know which one of these I would prefer, given only these choices, and it's definitely not the one that enables massive fraud and grifting.

[p0pcult]

What do you expect to happen, the local Sheriff gets to enforce whatever "laws" s/he can make up, so long as they aren't explicitly approved activities?

[danaris]

No, I more or less expect what is happening: until and unless clearer laws come from Congress, regulatory agencies use their best judgement on how to apply existing regulations on things that are pretty close to what cryptocurrencies are, to prevent mass scams and fraud.

[bpodgursky]

> If you want to be in this business, lawyers should be your _primary_ expense, and make sure you hire enough to be confident that you can defend your practices.

If you can say something like this with a straight face, you're just a bad person.

[fallingknife]

An enforcement agency should make the rules it enforces very clear. The DEA does make it extremely clear which drugs are illegal which is why the cartels never need to ask.