[chomp]

There's a few people picking sides here in the comments. Just reminding everybody that it's possible for two sides to be at issue; the SEC can be trying its best to apply its mandate in a world where technology has surpassed the law, and in a void of congressional action, and as a result giving very vague guidance so that it can squeeze its mandate into the crypto realm. And Coinbase can be purposely threading the needle in an area they know could probably be interpreted as being SEC regulated. In my opinion, Congress is the problem here, and their inaction is going to cause this to get duked out in the court, when it didn't have to be so.

[legitster]

I think part of the issue here is that the SEC is being decidedly coy. The remedy they are seeking is for the industry to essentially end itself.

I think it's fine to say that the SEC is trying it's best to apply a mandate and them seeking guidance from congress are all good ideas, but them beating around the bush and attempting some subterfuge is not a good look for a regulatory agency.

[rchaud]

> The remedy they are seeking is for the industry to essentially end itself.

Or in other words "register as securities exchange".

[legitster]

... which would require ditching all of their customers and establishing a brokerage. We're talking about a fundamentally different business that is not distinguishable from any existing business. Coinbase as we know it would be dead.

[danaris]

And what's the fundamental problem with that?

No business has an inalienable right to government support or sanction for their business model, least of all when their business is 100% in an area that is brand-new, poorly-understood, poorly-regulated, and absolutely rife with scams.

[legitster]

Sure, but I don't think it should be the government's prerogative to shut down businesses either, just on the grounds that regulators find the industry annoying. If people want to buy their silly crypto trinkets I don't see how moving it behind the curtain of a brokerage actually helps anyone.

I mean, the whole SEC thing is a bit of theater: they can't actually do anything to protect against frauds and scams and bad investments. All they can do is to push assets into the high-speed traffic of professional traders and hope that the market sorts things out for itself.

[danaris]

"Find the industry annoying" is an interesting way to characterize a regulatory agency that has investigated a situation and determined that it breaks the law.

[Fatnino]

Like when the government shut down a startup by some guy named Ross who was just trying to make a buck on the internet with his unregulated pharmacy. What a travesty.

/s

[fallingknife]

Then why won't they let them do exactly that? https://finance.yahoo.com/news/coinbase-says-just-no-way-to-...

[SpicyLemonZest]

The SEC isn't being coy at all. The current SEC chair has said repeatedly ever since he was appointed that most crypto assets are clearly securities under the existing law, and therefore crypto exchanges must register as securities exchanges. Crypto industry execs would just prefer to be unregulated, and are pretending to be confused about what the SEC wants to trick you into taking their side.

[vkou]

> Crypto industry execs would just prefer to be unregulated, and are pretending to be confused about what the SEC wants to trick you into taking their side.

It's also why they are loudly calling for Congress to weigh in. They know that their business will be nuked from orbit the second the laws on the books will be applied to them, so they are hoping that Congress carves out an exemption for them.

[legitster]

Well, it's not just their business. The SEC is telegraphing that they want to label all cryptocurrencies as securities. Without action from congress the entire technology is practically dead. No one is going to contribute to Ethereum if they have to log into a Schwab account to buy Ether.

[emptysongglass]

I've only seen bad behavior from the SEC since I started following their crypto-crusade. Both Coinbase and Telegram came to the SEC voluntarily and asked for guidance. The SEC did not consult in good faith, instead springing the trap when either company announced their crypto product. For Telegram, it was TON, for Coinbase, it was Lend. [1]

Whatever your feelings on crypto, these are bad actions and if embodied in a person, I would tell the world far and wide of this person's poor character and total lack of ethics.

[1] https://www.coinbase.com/blog/the-sec-has-told-us-it-wants-t...

[vkou]

Why would the SEC need congressional action to regulate securities (which is what some of the crypto tokens traded on exchanges are)?

Why would Coinbase think that it could run a securities brokerage, exchange, and clearing house without registering with the SEC?

Just because you've added '... But on the internet' to your business model does not require additional legislature to determine whether or not you are trading securities.

[paulddraper]

Back in 2018, the SEC considered decentralization as an excluding criterion.

https://corpgov.law.harvard.edu/2022/12/06/why-cryptoassets-...

[vkou]

Why not link to the actual SEC guidance, instead of an op-ed by a crypto CEO that is reading what she wants[1] to read from it?

https://www.sec.gov/files/dlt-framework.pdf

It's only a few pages, and nothing in it indicates that decentralization is sufficient as an excluding criterion.

> Although no one of the following characteristics of use or consumption is necessarily determinative, the stronger their presence, the less likely the Howey test is met:

You can't just cherrypick the words that you want to hear in a sentence, exclude all the other words, and claim that the SEC gave the green-light to decentralized crypto! In fact, nearly all of the exculpatory characteristics listed just below that paragraph focus on the utility value of a crypto token, as opposed to its speculative value! The real versus speculative value (Storing data on filecoin, versus trading filecoin around) is what's most important to the SEC, not how decentralized the network is!

... Also, most crypto is ridiculously centralized, and if Coinbase listed even one of the problem tokens, they are... Running an illegal securities exchange.

---

[1] Read the actual SEC guidance, and try to square it with this quote by Jai Massari, the author of that op-ed:

> First set out in a 2018 speech by SEC Corporation Finance Division Director William Hinman, and then described in more detail in 2019 staff guidance,[6] the core idea is that where a blockchain project is sufficiently decentralized, the cryptoasset associated with the project will not be or represent an “investment contract” under the so-called Howey test,

If that's what she gets out of the SEC document (linked above), Jai doesn't have the reading comprehension of a high-schooler[2], let alone one that's appropriate for a 'visiting lecturer' at Berkeley!

[2] What she seems to have is an incredibly motivated reading comprehension. The same kind of motivated reading comprehension that's currently landing Coinbase into hot water.

[paulddraper]

> most crypto is ridiculously centralized

That is true.

IMO Bitcoin is the only crypto is that is legitimately decentralized; no single governing organization.

[MacsHeadroom]

It's not the only one. Dogecoin, for example. I do not mean to defend Dogecoin or lend it any legitimacy. But it clearly does not meet the criteria for a security as it was simply a very early fork of Bitcoin where some zeros were added and "Bit" was replaced with "Doge."

[paulddraper]

True

[rchaud]

> Why would Coinbase think that it could run a securities brokerage, exchange, and clearing house without registering with the SEC?

They saw Uber and Airbnb steamroll through taxi and hotel regulations successfully. But that was local, and SEC is federal.

[linuxftw]

You're getting downvoted, but you're 100% correct.

[latchkey]

> Why would Coinbase think that it could run a securities brokerage, exchange, and clearing house without registering with the SEC?

Coinbase is a public company on NASDAQ. They are about as registered with the SEC, as possible.

Update: cause I'm getting downvotes. See below. The point that I'm making is that if this company is acting illegally, then why is it still trading?

[twic]

The registration under discussion here is registration as a broker-dealer, or an exchange, or whatever, not as a listed company.

[latchkey]

Tom Anderson, of myspace? Wow. Hi!

Let me direct you to this:

https://finance.yahoo.com/news/coinbase-says-just-no-way-to-...

The whole point here is that Coinbase is acting in good faith by trying to do things "the right way"... including becoming a public company and trying to register in whatever compliance ways they can. All the way to announcing that they will go to court over all of this. All because their existing efforts haven't worked.

Update: the discussion is happening right now around how coinbase is a public company that is being declared that it is doing illegal things. If so, then why is it still trading?

https://www.youtube.com/live/DSsp8Rvh5n0?feature=share

-4:15

[Volundr]

> If so, then why is it still trading?

Because breaking the law does not cause your stock to be delisted?

I'm not informed enough of the SEC complaint to have much of an opinion on how valid the SEC's or Coinbase's respective cases are, but "I can still by stock" is no evidence that Coinbase isn't breaking the law or violating regulations. Companies do illegal things all the time, delisting the stock and shuttering the company is a resolution of last resort, not first resort.

[twic]

> Tom Anderson, of myspace? Wow. Hi!

No, i'm the one from Beavis and Butt-Head.

[ahahahahah]

If what you are doing requires registering with the SEC for it to be legal, and there's no way to register what you are doing with the SEC, then that means that it is illegal to do what you are doing (like how could you think that possibly means you are free to go do that thing?).

[linuxftw]

No, coinbase is trying to trade unregulated securities and asking the SEC to give them the OK before hand so they don't end up in court. Predictably, the SEC's not going to do that.

[ac29]

> cause I'm getting downvotes. See below. The point that I'm making is that if this company is acting illegally, then why is it still trading?

Is your position that no publicly traded company has ever done anything illegal?

[latchkey]

Not what I'm saying at all. I'm saying that a publicly traded company went through all of the due diligence that it takes to become a publicly traded company (if you've ever been through that, it is pretty intense) and then asked for further clarification on their existing practices, couldn't get that, then got served a wells notice and is now having to go to court to get further clarification. All because the SEC can't or won't give clear guidance on things that they are supposed to be in charge of.

[ahahahahah]

> asked for further clarification on their existing practices, couldn't get that,

That's not right. They got clarification they just didn't like the answer.

[rchaud]

> Coinbase is a public company on NASDAQ. They are about as registered with the SEC, as possible.

That is not even close to correct. NASDAQ itself is a publicly traded company (quote: NDAQ), that nonetheless has to register separately as a securities exchange.