NASDAQ Stock Coinbase Stock: Coinbase CEO Says Years of Litigation With SEC Is Possible

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Forex in this article

• Coinbase receives Wells notification
• Years of litigation coming?
• Ripple process has been running since 2020

SEC targets Coinbase

In March, US-based crypto exchange Coinbase was targeted by the United States Securities and Exchange Commission (SEC), the country’s stock exchange regulator. The trading platform for Bitcoin, Ether & Co. received a so-called “Wells Notice” last month that deals with Coinbase’s staking functions. “Based on discussions with employees, the company understands that these potential enforcement actions will relate to aspects of the company’s spot market, the staking service Coinbase Earn, Coinbase Prime and Coinbase Wallet,” the company said in a May 22 filing. Read at the SEC in March. “The potential civil lawsuit could result in injunctive relief, refunds and civil penalties.” Coinbase CEO Brian Armstrong initially reacted calmly to the agency’s announcement on his Twitter account. He referred to the extensive review by the SEC two years ago that took place as part of the IPO.

Preparations for court proceedings are already underway

Armstrong now explained to the US broadcaster “CNBC” that court proceedings on the subject are currently being prepared – and criticized the actions of the SEC employees. “We’ve met with them over 30 times in the last year… we’ve never had a single feedback from them on what we can do better or differently, and then this Wells message came,” the CEO said. “I think in the end we will have to go to court to get the necessary clarity and create a case law.”

No clear set of rules from the SEC

In the further course of the conversation with the television station, Armstrong also complained that the authority shifted the responsibility onto the companies and presented legal regulations as understandable without naming clear guidelines for the cryptocurrency business. “The regulators’ job is to release a clear set of rules and allow the market to be safe but also thrive in this country and I think they have completely shied away from their responsibilities,” said the CEO.

Although Armstrong assessed the discrepancies with the SEC as “unfortunate”, he explained that in case of doubt one was also prepared for a court case lasting several years. “We never seek litigation, but it appears that they [Mitarbeiter der SEC, Anm. d. Red.] initiated it in this case and if we need to go to court to get the clarity we need then we are very willing to do that,” he continued.

Other crypto companies also in the focus of the SEC

In recent years, the SEC, headed by Gary Gensler, has been increasingly critical of cryptocurrencies and has taken action against several companies in the industry. One of the more prominent disputes is the court conflict with Ripple Labs, the developer of the cryptocurrency Ripple, which has existed since 2020. The SEC accuses the makers of the coin that it is traded like a security and should therefore have been registered in the US agency’s database before it could be sold, which was not done. Instead, the cryptocurrency was generated centrally and is not used in the scenarios advertised by Ripple Labs. Executives sold billions of dollars in units of the internet coin to fund the company’s operations and enrich themselves, the SEC alleges. In the past, Gensler has also increasingly criticized the crypto market and was open to classifying Bitcoin as a commodity, but all other crypto assets should be seen as securities.

Is Coinbase turning its back on the US?

Speaking at a fintech event in London, referenced by CNBC, Armstrong also reiterated that while the US could be a major player in the cryptocurrency market, regulatory ambiguity could be the crypto hub’s undoing. If there is no sign of improvement in this area, Coinbase will also consider relocating operations to other locations, the company’s CEO said. “I think if a number of years go by where we don’t see regulatory clarity around us… we might need to consider investing more in other parts of the world,” Armstrong said. They also want to keep an eye on Great Britain, as the island state is currently developing into a “crypto hub”. “We’re a company…like any business, we have a budget, and we have to decide where to allocate it. And that means what products we want to build, but it also means which countries we want to build it in any given year want to invest,” the CEO added to CNBC.

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