Coinbase CEO Turns Up Rhetoric on SEC Chair

The legal battle between Coinbase and the Securities and Exchange Commission (SEC) escalated with fierce rhetoric on Monday.

The battle between Coinbase and the SEC is not cooling off. The exchange is on the outs with the SEC over crypto regulation. Last week, the Third Circuit Court of Appeals ordered the SEC to respond to a complaint by Coinbase. Coinbase called the SEC’s guidance for US companies operating in crypto insufficient. The exchange asked the commission to explain how requirements should be adapted to digital assets.

The appeals court ordered the SEC to respond to Coinbase’s complaint within ten days. Coinbase is allowed to offer a rebuttal within seven days after that.

Is Gensler Trying to Cripple the Industry?

Coinbase is the second largest cryptocurrency exchange globally, with over a billion dollars in trading volume, according to CoinMarketCap. Its CEO, Brian Armstrong, has decided views about crypto regulation and the SEC.

“The SEC is a bit of an outlier here,” Armstrong told CNBC’s Dan Murphy on Monday. “There’s kind of a lone crusade, if you will, with Gary Gensler, the chair there, and he has taken a more anti-crypto view for some reason.”

In Armstrong’s view, there may be a silver lining to the current fight. The SEC may have to address the lack of clarity that Armstrong blames for misunderstandings about what is legal. And for the lawsuits that arise. Armstrong stated:

“I don’t think [Gensler is] necessarily trying to regulate the industry as much as maybe curtail it. But he’s created some lawsuits, and I think it’s quite unhelpful for the industry in the US writ large, but it also is an opportunity for Coinbase to go get that clarity from the courts that we feel will really benefit the crypto industry and also the U.S. more broadly.”

Last month, Coinbase filed a legal action in federal court asking the SEC to respond to its July 2022 petition for guidance in the crypto industry through formal rulemaking. Its petition requested that the SEC “propose and adopt rules to govern the regulation of securities that are offered and traded via digitally native methods.” 

The action aims to compel the SEC to either accept or reject the petition, which will allow Coinbase to challenge the decision in court.

Coinbase chief legal officer Paul Grewal said in a blog post that the SEC had likely “already made up its mind to deny our petition.” He continued: “But they haven’t told the public yet. So the action Coinbase filed today simply asks the court to ask the SEC to share its decision.” 

Coinbase Not Leaving After All?

Last month, Armstrong indicated that the company may move out of the U.S. if unclear regulations persist. He cited the UK as a potential new destination. Although, on Monday, Armstrong retracted his previous suggestion that Coinbase might have to relocate its headquarters abroad.

“Coinbase is not going to relocate overseas,” Armstrong said. “We’re always going to have a US presence … But the US is a little bit behind right now.”

“I would say we’re seeing more thoughtful approaches, for instance, in the EU [European Union], they’ve actually already passed comprehensive crypto legislation, the UK has been incredibly welcoming, and for us there, and that’s been a hub where we’ve decided to serve the UK market.”