"So there's various ways that you could imagine a crypto asset would not be a security, right if it's sufficiently decentralized there's no common enterprise, right? If there's some specific utility surrounding it, it's not just for the purpose of the value going up, right?"
"All four of those things have to be true," Armstrong told The Wall Street Journal this week. Armstrong argues that the crypto-assets Coinbase works with do not pass the securities-defining Howey test-(1) an investment of money (2) in a common enterprise (3) with a reasonable expectation of profits (4) earned through the efforts of others-which is how securities are defined in the U.S., per a 1946 Supreme Court ruling. laws, even while failing to follow them," reported The New York Times.īut Coinbase disputes this characterization and contends that the legal framework just isn't clear, nor has it been established that cryptocurrencies are securities or ought to be treated as such. detailed the ways in which Coinbase's leaders had demonstrated that they knew how the marketing and sale of digital assets should be governed under U.S. "We asked the SEC specifically to identify which assets on our platforms they believe may be securities, and they declined to do so," Paul Grewal, Coinbase's chief legal officer, wrote at the time. Back in March, the exchange was sent a Wells notice by the SEC, as Reason's Brian Doherty reported at the time, which informed the company that the agency had made a "preliminary determination" that it might be seeking enforcement action against Coinbase for purported securities law violations. By the way, that would also kind of mean the end of the crypto industry in the U.S." "The only sort of high-level statements they've made is that everything other than bitcoin is a security which, that's just not what it says in the law. "I don't feel like there's a clear rulebook," Coinbase CEO Brian Armstrong told The Wall Street Journal this week. Many people within the crypto industry have long maintained that such digital assets should not be considered securities and that the regulatory framework surrounding crypto has been kept needlessly vague. Coinbase's staking products are also deemed securities by the SEC, which the company disputes. In Coinbase's case, the SEC alleges that it has sold 13 crypto-assets (of the roughly 250 on offer) that ought to be registered with regulators, as they deem them to be securities. If they are securities, as the SEC claims, firms like Coinbase and Binance have been illegally operating unregistered exchanges. The core issue that's long been in dispute is whether cryptocurrencies are different from securities like stocks and bonds. The day prior, the SEC filed charges against Binance for operating an unregistered securities exchange, also accusing CEO Changpeng Zhao of civil fraud. On Tuesday, the Securities and Exchange Commission (SEC), headed by Gary Gensler, sued crypto exchange Coinbase for not registering as a securities broker.
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