As the United States Securities and Exchange Commission (SEC) targeted Coinbase with a Wells Notice alleging that the crypto exchange’s staking products constituted unregistered securities, crypto community members went on social media to express various concerns, with some seeing a common enemy in the regulator.
SEC Warns Coinbase Of Enforcement Action Over Staking Rewards
Coinbase revealed on Wednesday that it had received a so-called Wells Notice from the SEC, alleging that the exchange giant was in violation of federal securities laws in the running of its staking product: Coinbase Earn. The notice also mentions aspects of Coinbase’s exchange, Coinbase Prime, and Coinbase Wallet.
“We asked the SEC specifically to identify which assets on our platforms they believe may be securities, and they declined to do so,” Coinbase chief legal officer Paul Grewal posited in a Wednesday blog post. “Today’s Wells notice also comes after Coinbase provided multiple proposals to the SEC about registration over the course of months, all of which the SEC ultimately refused to respond to.”
Grewal indicates that the company has met with SEC officials “more than 30 times over nine months”, but the agency has been unresponsive regarding the exchange’s proposals.
“We remain confident in the legality of our assets and services, and if needed, we welcome a legal process to provide the clarity we have been advocating for and to demonstrate that the SEC simply has not been fair or reasonable when it comes to its engagement on digital assets,” Grewal declared. Until then, Coinbase noted that it would operate products and services as usual.
Crypto Twitter Reacts
News of the SEC’s action against the leading crypto exchange in the U.S. spread like wild bushfire through the cryptosphere, igniting a debate over what it could mean for the burgeoning asset class in the nation.
Custodia Bank founder and CEO, Caitlin Long, tweeted:
“IT SHOULD BE CRYSTAL CLEAR BY NOW that the Biden Administration wants all #crypto (even the legit parts of it) — run out of the U.S. See also yesterday’s White House economic report, which dunked on all financial innovation while espousing the “stability” of traditional banks.”
Long and other crypto community members criticized the SEC for suddenly issuing the Wells Notice after it permitted Coinbase, a publicly-listed company, to offer staking rewards for many years and only now threatening to pursue enforcement action on allegations of offering potential unregistered securities.
Most crypto fans were going to bat for Coinbase, with Cinneamhain Ventures (CEHV) founder Adam Cochran indicating he had even moved “about half my hot wallet assets” to the exchange and he will also be buying Coinbase bonds until the SEC “gives them legal clarity or get congress to pass a fucking law to stop it.”
While the majority of community members were angered by the SEC’s action against Coinbase, some believe the exchange is getting its just desserts for delisting XRP after the SEC sued its issuer, Ripple.
The SEC has previously announced it reached a $30 million settlement with Kraken exchange over its staking business in the U.S. News of Coinbase’s well notice came shortly after the SEC filed charges against Tron founder Justin Sun and a bunch of celebrities for violations related to Tron (TRX) and BitTorrent (BTT) tokens.
