News of the U.S. Securities and Exchange Commission’s action against Coinbase, the number one cryptocurrency exchange in the United States, spread like wildfire through the crypto community, prompting an existential debate over what it could mean for cryptocurrency in the United States.
“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.,” tweeted Custodia Bank founder and CEO Caitlin Long. “See also yesterday’s White House economic report, which dunked on all financial innovation while espousing the “stability” of traditional banks.”
Long and others called into question the SEC’s sudden delivery of a so-called “Wells Notice” after it allowed Coinbase, a publicly traded company, to offer staking rewards for several years and only now threatening to sue Coinbase on claims of offering unregistered securities.
“Over the past 9 months, [Coinbase] has met with the SEC more than 30 times, sharing details of our business to build a path to registration,” wrote Paul Grewal, Chief Legal Officer at Coinbase. “During this time, the SEC hasn’t given 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 informing a company the agency intends to bring an enforcement action against them.
“Since day one, @coinbase has invested heavily in being fully compliant with U.S. laws even when it forced them to move slower or lose a competitive edge vs other exchanges that chose to take shortcuts,” wrote Chris Dixon, general partner at Andreessen Horowitz.
“The U.S. has a strong history of fostering innovation, and regulators have played a key role by establishing clear rules and pursuing bad actors,” Dixon continued. “We hope the U.S. will take a more constructive approach to collaborating with innovators while protecting consumers.”
Many expressed solidarity with Coinbase, with Adam Cochrane, 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 sore from Coinbase delisting XRP from the Coinbase Wallet last fall.
Ripple Labs has been in an ongoing court 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 will ever understand how the SEC can sign off on @coinbase being publicly listed then raise all these issues afterwards,” tweeted attorney Bill Morgan. “Forget just crypto, how is the SEC protecting shareholders of Coinbase with this dreadful conduct?”
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