Coinbase says ‘just no way’ to register with SEC amid calls for compliance
While Securities & Exchange Commission Chairman Gary Gensler has called for crypto exchanges to register with the agency, Coinbase (COIN), the largest U.S. crypto exchange, told Yahoo Finance that in their view there is no path to register with the agency .
“We’ve tried, and there’s just no way to do it,” Faryar Shirzad, CEO of Coinbase, told Yahoo Finance in an interview. “In fact, we filed a petition with the SEC back in June, listing the specific issues that the agency would have to address in order for crypto platforms to come in and register.”
Shirzad says that despite posting a list of questions asking how to register with the commission, the SEC has not responded to the inquiries.
SEC Chairman Gensler told Yahoo Finance back in December that his goal in regulating the cryptocurrency space was to bring “these platforms, the exchanges, the lending platforms…[into] compliance.”
“They can do it the right way by cooperating with the SEC, or we can stay the course with more enforcement actions,” Gensler said at the time. “And I have to say the runway is getting shorter.”
When asked if the SEC had engaged with crypto firms about this process, Gensler said, “It’s really on these entrepreneurs and business leaders in the crypto space.”
In Shirzad’s view, however, the SEC’s lecture does not match the clarity offered to the leaders in the area referred to by Gensler last year.
“When we ask specific questions: How do we get to a path to registration? There’s never an answer,” Shirzad said.
“We think the opportunity to build a crypto securities market in the US is hugely exciting, but we’ve stayed away from it because there’s no path to registration and there’s just no way to do it.”
A security-free platform
When asked about the perennial question of how tokens are categorized, Shirzad claims that Coinbase does not trade securities on its platform.
“We have around 200 plus assets that we list on our exchange. We review every asset before we list it to, among other things, make sure it’s not a fraud, that it’s cyber resilient, but most importantly, we look for [it has the] potential to be treated as a security,” Shirzad said. “If it is, we don’t list it.”
In an amicus brief filed Monday as part of a case against a former employee facing SEC allegations of insider trading and securities fraud for leaking information about new token listings on Coinbase, the crypto exchange said the digital assets Coinbase lists are not securities.
But Coinbase, if they get the right guidance and rules from the SEC, would like to list securities.
Shirzad says Coinbase is consulting the so-called Howey test, a Supreme Court ruling the SEC uses to determine whether a particular contract is an investment contract and should therefore be treated as a security.
While Coinbase is looking to engage with the SEC, the crypto exchange is also looking to Capitol Hill this year for what Shirzad expects will be “significant action on legislation” in 2023.
“Both sides of the Capitol are very much of the opinion that we need regulation around crypto, for crypto commodities, to create a spot market authority at the federal level for crypto securities to essentially encourage the SEC to provide the clarity that it hasn’t itself provided ,” Shirzad said.
He also said from Coinbase’s talks with lawmakers, he expects significant action on legislation starting “immediately.”
House Financial Services ranking member Maxine Waters told Yahoo Finance in an interview this week that the stablecoin legislation is “ready to go,” with Democrats and Republicans having resolved most of the outstanding issues.
“I think the legislation could be passed when we get back to Congress in a few days,” Waters said.
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