Published response to SEC
Major US crypto asset (virtual currency) exchange Coinbase released its response to the US Securities and Exchange Commission (SEC) “Wells Notice” on the 27th. Coinbase does not list any securities, and the SEC has criticized it for its arbitrary crackdown.
Today, Coinbase is sharing our response to the SEC’s Wells notice from last month. 1/7 https://t.co/1G0jsA0TGN
— paulgrewal.eth (@iampaulgrewal) April 27, 2023
Coinbase also pointed out that the SEC has not fulfilled its obligation to set up a proper registration system for cryptocurrency companies. “While we do not like to sue the SEC, we will also stand up to protect ourselves and uphold the rule of law,” he said.
As background, the “Wells Notice” sent by the SEC to Coinbase is an official document telling companies and others that the SEC plans to take legal action. The SEC was investigating Coinbase for possible securities such as listed cryptocurrencies and staking service Coinbase Earn.
connection: U.S. SEC investigates Coinbase on suspicion of violating securities laws Sends Wells notice
In response, Coinbase CEO Brian Armstrong said that he was preparing to fight the case in court, saying that it would be necessary to actually go to court, set a precedent, and clarify the regulations.
connection: US Coinbase CEO “Preparing to fight with SEC in court”
Coinbase once again criticized the SEC for failing to provide clear guidelines so far, and also mentioned the proposal to amend the Securities and Exchange Act.
On the 14th, the SEC is soliciting public comment on proposed amendments to the Securities and Exchange Act rules. The proposed amendment incorporates a definition that allows existing rules to be applied to platforms trading “cryptocurrency securities,” including “DeFi (decentralized finance).”
Coinbase argues that this move is evidence that the SEC itself is aware that there has never been a clear rule, stating:
The move is evidence that the SEC itself agrees that clear rulemaking is needed. Furthermore, the fact that the SEC has not made such rules until now confirms the fact that the SEC has not provided clear rules to the cryptocurrency industry such as Coinbase.
Nor would such rulemaking address other important issues, such as the application of the Howie test to cryptocurrencies.
Based on the above alone, the SEC should stop taking enforcement actions against Coinbase.
What is a howie test
A test that determines whether a particular transaction falls under one of the securities trading definitions of an “investment contract” in the United States. Derived from the SEC’s lawsuit against WJ Howey. Although this itself is not legally binding, the SEC has taken legal action against multiple ICOs (token sales) based on this test.
In addition, since 2018, Coinbase has sought advice from the SEC regarding the token listing process and staking services on Coinbase from a securities law perspective, and SEC officials expressed specific concerns about the provision of these services. He continues that he never showed
Coinbase also said there are various hurdles for the SEC to prove its claims.
For example, the CFTC views many cryptocurrencies as “commodities” rather than “securities,” which differ from those of the SEC, and noted that the SEC needs to resolve this difference of opinion.
He added that it is not easy to apply the Howie test or to prove that Coinbase’s services meet existing legal definitions.
Coinbase is also issuing an NFT (Non-Fungible Token) called “Stand with Crypto” as a symbol of unity in the crypto community calling for wise crypto policy.
Not intended for utility or value, issuance fees will be donated to organizations dedicated to defending cryptocurrencies.
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