Crypto Community Fired Over SEC Action Against Coinbase

News of the US Securities and Exchange Commission’s crackdown on Coinbase, the largest cryptocurrency exchange in the US, spread like wildfire through the crypto community, sparking an existential debate about what it could mean for cryptocurrency in the US.

“It should be crystal clear by now that the Biden administration wants all crypto — even the legitimate parts of it — out of the US,” tweeted Custodia Bank Founder and CEO Caitlin Long. “See also yesterday’s economic report from the White House, which slammed all financial innovation while touting the ‘stability’ of traditional banks.”

Long and others questioned the SEC’s sudden issuance of a so-called “Wells Notice” after it allowed Coinbase, a publicly traded company, to offer staking rewards for several years and only now threatened to sue Coinbase over allegations of offering unregistered securities.

“During the past 9 months, [Coinbase] has met with the SEC more than 30 times and shared details of our business to build a path to registration,” wrote Paul Grewal, Chief Legal Officer at Coinbase. “During this time, the SEC has provided basically 0 feedback on what to change or how to register. Instead, today we received a Wells Notice.”

A Wells Notice is a notice from the SEC that informs a company that the agency intends to bring an enforcement action against them.

“Since day one, @coinbase has invested heavily in being fully compliant with US laws even when it forced them to slow down or lose a competitive edge over other exchanges that chose to take shortcuts,” wrote Chris Dixon, general partner at Andreessen Horowitz.

“The United States has a strong history of fostering innovation, and regulators have played a key role in establishing clear rules and pursuing bad actors,” continued Dixon. “We hope the United States will take a more constructive approach to working with innovators while protecting consumers.”

Many expressed solidarity with Coinbase, with Adam Cochran, founder of Cinneamhain Ventures (CEHV), saying he will “vote with my wallet” and become a customer — if Coinbase fights back against the agency.

While many were quick to call out the SEC, some took the opportunity to criticize the firm, including many in the XRP community who were still hurt after Coinbase removed XRP from the Coinbase Wallet last fall.

Ripple Labs has been in an ongoing legal battle with the SEC since December 2020 when the agency accused the company, whose founders launched XRP in June 2012, of misleading investors and raising $1.3 billion in unregistered securities.

“I doubt I’ll ever understand how the SEC can sign off on @coinbase being publicly traded and then raise all these issues afterwards,” tweeted attorney Bill Morgan. “Just forget about crypto, how is the SEC protecting Coinbase shareholders with this horrible behavior?”