SEC, States Aim Enforcement Actions Against Coinbase; SWIFT Testing Tokenized Asset Systems

SEC charges Coinbase

Coinciding with another round of hearings aimed at creating legislation for digital assets – and Monday’s action against Binance – the Securities and Exchange Commission (SEC) delivered an enforcement action against Coinbase. The agency said in a statement that Coinbase was “operating its crypto asset trading platform as an unregistered national securities exchange, broker, and clearing agency.” The SEC also charged Coinbase for “failing to register the offer and sale of its crypto asset staking-as-a-service program.”

Read the statement. And, see the 101-page lawsuit (PDF).

The suit was not unexpected given the “Wells notice” Coinbase received in March suggesting an enforcement action was on the way.

It was only two years ago that Coinbase’s registration statement allowing it to go public was approved by the SEC.

SEC charges Coinbase – states

The lawsuits for Coinbase didn’t stop with the SEC yesterday either. Though likely well-coordinated with the securities agency, “a multistate task force comprising state regulators from Alabama, California, Illinois, Kentucky, Maryland, New Jersey, South Carolina, Vermont, Washington and Wisconsin have issued a Show Cause Order against cryptocurrency exchange Coinbase,” reports Cointelegraph. Note the inclusion of both “red” and “blue” states in the group.

The Order gives Coinbase 28 days to show cause why they should not be directed to cease and desist from selling unregistered securities in Alabama” and in coordination with the other states mentioned. The action stems from the Coinbase’s staking rewards service says the Order. Read the order (PDF).

SEC charges Coinbase – reaction

SEC Chair Gary Gensler went on the airwaves to discuss, and promote, his agency’s latest lawsuit. He went even further  on CNBC’s Sqwuak Box to comment on currencies in general – well-beyond his agency’s usual jurisdiction: “We don’t need more digital currency. We already have digital currency. It’s called the U.S. dollar. It’s called euro. It’s called the yen. They’re all digital now.” See the interview.

House Financial Services Digital Assets, Financial Technology and Inclusion Subcommittee Chair French Hill (R, AR) commented on Chair Gensler for Politico right after the Binance case was filed on Monday saying, “He chases down Kim Kardashian about promoting crypto but does nothing about actually working with companies to make sure they’re in compliance.” Read more.

Coinbase Chief Legal Officer, Paul Grewal, said at yesterday’s House Ag hearing, “It’s disappointing, but not surprising, that the SEC has decided to bring legal action against Coinbase today, the day of our testimony before this committee’s critical hearing on creating a workable framework for digital asset regulation. (…) The solution is legislation that allows fair rules for the road be developed transparently and applied equally, not litigation,” according to The Block. Read more.

Coinbase made a video for its social channels, too, highlighting data points on the company’s innocence including its communication with the SEC such as “Times we meet with the SEC in 2022 asking for guidance: 22.” See them all.

The Wall Street Journal’s Telis Demos speculates, “…what should be clear is that this [enforcement action] is a major challenge to the crypto business, not just something that narrows it at the edges or is aimed at a rogue actor. This is a fight that has been brewing for years. At least now it has begun in earnest.” Read more.

In a doomsday scenario for Coinbase, lawyer Preston Byrne offers a provocative titled in an op-ed on CoinDesk: “How To Build a Compliant Crypto Exchange Post-Coinbase.” Most of the advice is practical including simply moving off-shore, but be ready to move back when crypto gets “regularized” in the U.S. within “five years if not sooner.”  Read that one.

Fortune’s Leo Schwartz that if there’s good news amidst the enforcement melee, Circle’s USDC stablecoin appears to have come out unscathed, at least for now. Schwartz writes, “The absence of the popular stablecoin [USDC] created by Coinbase and U.S. crypto firm Circle is perhaps a surprise given the SEC’s decision to list the Binance stablecoin BUSD as a security in its lawsuit against the rival exchange on Monday.” Read more.

new hearing

House Financial Services Chair Patrick McHenry (R, NC) officially announced that next Tuesday,  June 13 at 2 p.m., there will be a hearing in front of his full committee: “The Future of Digital Assets: Providing Clarity for the Digital Asset Ecosystem.” Though no other information was available late yesterday, this hearing likely dovetail’s with yesterday’s House Agriculture hearing on market structure.

new lobby

Messari Crypto’s Ryan Selkis is launching a new lobbying organization, Digital Freedom Alliance, which will focus on pro-crypto messaging in DC and to the general public.

Selkis told Punchbowl News , “We are fighting with one hand tied behind our back as long as sentiment is this negative. (…) There’s a gap in the market right now around running an actual campaign, and a pro-crypto messaging campaign in particular, that is going to change the sentiment in D.C. It’s been a brutal six months.” Read more.

use case – tokenized assets

Looking to facilitate tokenized asset investments, SWIFT announced new trials for its payment messaging system which will allow interoperability between blockchains. According to a press release, trial participants include “Australia and New Zealand Banking Group Limited (ANZ), BNP Paribas, BNY Mellon, Citi, Clearstream, Euroclear, Lloyds Banking Group, SIX Digital Exchange (SDX) and The Depository Trust & Clearing Corporation (DTCC).”  Read more.

And, read this from Ledger Insights about how SWIFT’s expanding blockchain strategy also includes enabling Central Bank Digital Currencies (CBDCs).

still more tips

SEC files temporary restraining order to freeze BinanceUS assets – and Daily Mail

Argus Labs Raises $10 Million for Ethereum Gaming Networks – Decrypt

Bankrupt Crypto Companies Are Fighting Over a Dwindling Pot of Money – Wired

Collaboration between Mara Foundation, NITDA, and Circle aims to generate adoption of blockchain technology in Nigeria – ChannelsTV

SEC v. Binance: ‘A web of deception’ – Molly White

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