We Asked SEC to Register, They Sent Us a Wells Notice Says Coinbase

“Tell us the rules and we will follow them.” So say Paul Grewal, Coinbase’s Chief Legal Officer.

“After years of asking for reasonable crypto rules, we’re disappointed that the SEC is considering courts over constructive dialogue. But if courts are required, so be it. We’ll defend the rule of law,” Grewal said.

Most astonishing are the revelations they were in close contact to register with the Securities and Exchanges Commission (SEC).

“SEC asked us to provide our views on what a registration path for Coinbase could look like – because there is no existing way for a crypto exchange to register,” Grewal said.

That was last year, and what follows is damning. Not of Coinbase which has tried since 2012 to be fully compliant in all ways, in part because it builds a moat around their empire, but of SEC. Grewal says:

“We developed and proposed two different registration models. We spent millions of dollars on legal support to build these proposals and repeatedly asked for the SEC’s feedback. We got none.

We also reiterated that we stand by our listings process – we don’t list securities today – and repeatedly invited the SEC to raise any questions about any asset at all on our platform. They raised none.

We met with the SEC more than 30 times over nine months, but we were doing all of the talking.

In December 2022, we asked the SEC again for some feedback on our proposals. The SEC staff agreed to provide feedback in January 2023.

In January, the day before our scheduled meeting, the SEC canceled on us and told us they would be shifting back to an enforcement investigation.”

Admitting that there is no way to register, and then opening an investigation, basically amounts to a ban.

SEC of course has no legal authority whatsoever to ban crypto exchanges, so if we were Coinbase we would countersue for abuse of authority and our first defense would be to strike down any court action by SEC as vexatious because they need to come up with a registration programs first then sue for non compliance.

In addition if SEC files in that New York district court as they love to, our first action would be for the case to be moved, in this case to California because that’s where Coinbase is based.

Coinbase is being threatened with court action regarding “an unspecified portion of our listed digital assets, our staking service Coinbase Earn, Coinbase Prime, and Coinbase Wallet.”

So throw the kitchen sink. The good news is that Coinbase has lawyers on payroll anyway as they need to comply with tons and tons of matters, so may well keep them busy with cases that may well go on for years and if Coinbase loses we’d expect appeals all the way to the Supreme Court.

That may buy the crypto space a decade, but Coinbase is already considering launching new services offshore while blocking US citizens.

They’re thinking of launching perpetual swaps, to compete with Binance and other exchanges that aren’t trapped in catch 22 where you have to comply, but there is no actual way for you to do so. Where you have to register, but you have to come up with the form and once you do, they don’t accept it anyway.

The definition of a banana republic is a country where there is no rule of law. The fundamental and ultimate defender of the rule of law is the judiciary. This generation is now about to find out just how independent that judiciary is. We hope fully independent, as otherwise the United States would be in far bigger trouble than anyone thought.

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• Source: https://www.trustnodes.com/2023/03/22/we-asked-sec-to-register-they-sent-us-a-wells-notice-says-coinbase