8-6-2023 (SAN FRANCISCO) Brian Armstrong, the Chief Executive Officer of Coinbase, responded to the recent lawsuit filed by the US Securities and Exchange Commission (SEC) against the cryptocurrency exchange. He referred to SEC Chair Gary Gensler as an “outlier” and reassured customers that their funds were secure.
The SEC’s lawsuit, filed on Tuesday, alleges that Coinbase traded at least 13 crypto assets that should have been registered as securities, including tokens like Solana, Cardano, and Polygon. Additionally, the agency accuses Coinbase of operating as an unregistered exchange, broker, and clearinghouse.
Armstrong, known for his criticism of the SEC and advocacy for clearer crypto regulations, stated at a Bloomberg conference that Coinbase had approached the regulator to seek registration but was met with a cold response from Gensler during their initial meeting.
Gensler has consistently maintained that most tokens are securities and has emphasized the SEC’s authority over the crypto market. The US President’s Working Group on Financial Markets has also suggested that certain coins linked to fiat currencies could be classified as securities.
Crypto companies, including Coinbase, dispute the classification of crypto tokens as securities and have repeatedly called for the SEC to establish transparent rules.
Armstrong described Gensler as an “outlier” and mentioned that several lawmakers he spoke to supported the development of a clear regulatory framework for the technology.
Following Armstrong’s comments, Coinbase shares rebounded, rising approximately 3.1% to reach US$53.2 (S$71.7).
The SEC declined to comment on the matter.
In a separate case, the SEC sued Binance, the world’s largest cryptocurrency exchange, accusing it of selling cryptocurrency products without registering them as securities. The agency also alleged that Binance manipulated trading volumes, misappropriated customer funds, and failed to restrict US customers from its platform.
Armstrong highlighted the differences between the two cases, stating that Coinbase has not faced allegations of misappropriating customer funds. He emphasized that the situations involving Coinbase and Binance “could not be more different.”
Paul Grewal, Coinbase’s Chief Legal Officer, expressed confidence that the SEC would not attempt to freeze Coinbase’s assets, as they did in the case of Binance. Grewal stated that the criteria for asset seizure did not apply to Coinbase.
Binance has yet to respond to the request for comment. In a statement, Binance pledged to vigorously defend itself against the SEC lawsuit, which it characterized as reflecting the agency’s refusal to provide clarity to the crypto industry.
Armstrong has previously criticized the SEC’s actions. In 2021, he accused the agency of “sketchy behavior” after it warned Coinbase about its planned lending program, prompting the company to cancel the product.
Last year, Coinbase disclosed an SEC probe into its asset listing processes, staking programs, and yield-generating products. The company had been in discussions for a potential settlement with the SEC in the first quarter of this year, which would have involved paying a penalty and establishing a path for registration with the agency. However, the talks broke down in March when the SEC made it clear that certain aspects of Coinbase’s business model were deemed illegal.
Coinbase has been advocating for the SEC to develop new crypto-specific regulations since last year and recently sought a response from the regulator through the US Court of Appeals for the Third Circuit. The court has ordered the SEC to provide a response within a week.
Grewal stated that despite the lawsuit, Coinbase remains open to dialogue with the SEC regarding the regulation of cryptocurrencies. However, he emphasized that the company is fully committed to defending itself in court.
