Newsletter: Not hedged
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Last week, when the CEO of Coinbase decided to accuse the US Securities and Exchange Commission of “rough behavior”, some cryptocurrency exchange owners watched in horror. However, others applauded.
Coinbase boss Brian Armstrong posted on Twitter to reflect the anger of crypto entrepreneurs who believe that regulators hinder innovation and have been slow to provide clear rules for the nascent digital asset industry.
“Coinbase is fighting a good battle. If they lose… the SEC will become more aggressive. They will draw the line and enter the crypto space,” said Alex Mathins, CEO of Celsius Network, a crypto lending platform Said Alex Mashinsky.
When Coinbase disclosed The U.S. Securities and Exchange Commission threatened to sue the exchange If it launches a product called Lend, the product is designed to allow users to earn interest on certain digital assets on the platform. The company insisted that Lend was not under the jurisdiction of the regulator and the SEC did not explain its concerns.
However, on Tuesday, as US senators requested more guidance, SEC Chairman Gary Gensler stated that the existing laws and the Supreme Court’s precedent were clear.
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He also complained in particular about the lack of consumer protection for lending products, and said that Coinbase has not yet been registered with the US Securities and Exchange Commission, “although they have dozens of tokens that may be securities.”
The pending showdown with the largest U.S. cryptocurrency exchange may help determine the scope of the U.S. Securities and Exchange Commission’s power over digital assets in the future and disturb other cryptocurrency groups—especially the surge in the number of platforms that provide services at the same time. Juicy earnings for traders Approximately 7% to 12% of cryptocurrency deposits.
“This is law enforcement regulation,” said John Collins, a partner at FS Vector, a financial technology consulting firm and former policy director at Coinbase.
“These products are now in large numbers in the entire encryption field… If the responsible companies in this field don’t take the time to evaluate the products they provide, I would be very surprised [similar] product. “
The US Securities and Exchange Commission took enforcement actions against the initial token offering market. In December of last year, it sued the cryptocurrency group Ripple, accusing it of offering XRP tokens as unregistered securities. It also agreed to a settlement with Telegram, claiming that the messaging app had conducted a $1.3 billion unregistered securities offering.
Similarly, the core of the dispute between the US Securities and Exchange Commission and Coinbase is Whether Lend is eligible as a security under US lawSome people believe that the cryptocurrency exchange’s guarantee of providing returns to all customers from its loan program brings it closer to the definition of securities under the US Supreme Court’s case. The case is called the Howey test, which states that “investing funds in a common enterprise A reasonable expectation of profit from the efforts of others” is a guarantee.
Coinbase told the Financial Times that, given the existence of other similar products, it does not know why this particular product would be a target.
In the era of ultra-low interest rates, more and more crypto platforms have begun to provide complex and high-risk interest-bearing products to traders who are hungry for profit, so the requirements are clear. Although the structure of products often varies from issuer to issuer, the Coinbase dispute has left many people wondering about their future.
Stephen Ehrlich, CEO of Voyager Digital, a Toronto-listed cryptocurrency exchange, said: “Now we are a guessing armchair quarterback.” Provide deposit income for American customers.
Antoni Trenchev, the chief executive of Nexo, a digital asset platform, said his company’s lawyers are studying the assumption that “everyone in the industry will receive the same problems as the regulators and Coinbase.”
He said that Nexo’s interest-bearing products did not violate any rules, but added that if Coinbase pursues and loses the lawsuit, the company is still exploring other options. He said that this includes “whether it is only allowed to sell these products to qualified investors” or establishing partnerships with banks.
Coinbase said it is concerned about similar products it offers due to a lack of clarity. Celsius said it is confident that none of the products issued in the United States are securities. Gemini offered an 8% annual interest rate for its Gemini dollar coins and declined to comment.
Rather than give up lending products altogether or risk being sued, Coinbase and other companies have a third option: register their products as securities. This is a method that Gensler encourages, believing that cryptocurrency exchanges should “ask for permission” instead of “begging for forgiveness.”
However, Voyager’s Ehrlich believes that this may also be difficult given the nuances of digital assets. “How can you explain encryption [as] There is no place to say how to cover digital assets? He said, pointing out that the audit encryption lacks clarity.
This confrontation highlights the debate about whether it is better to incorporate digital assets into the existing regulatory framework, or whether regulators should develop specific encryption systems as in some jurisdictions.
Gensler said on Tuesday that “in the 90 years since the 1930s, the company has found innovative ways” that meet the agency’s securities registration requirements.
But Isaac Boltansky, director of policy research at Compass Point Research & Trading, said: “We are discussing attempts to incorporate civil war-era regulatory systems into highly destructive digital asset categories.”