- The fallout from the SEC-Coinbase saga continues to grow
- Many luminaries in the crypto space have had their say over the SEC’s actions
- The responses are overwhelmingly negative against the agency who don’t seem to be practicing what they preach
The fallout from the Securities and Exchange Commission’s (SEC) decision to threaten Coinbase with a lawsuit over its now postponed Coinbase Lend program rather than work with it to find a path through the regulatory morass has gathered steam. The exchange alerted the public that it had been threatened with legal action if it launched its lending product, despite the SEC’s stated desire to get crypto companies to ask permission rather than beg forgiveness. The news caused big players in the crypto world to respond as the entire space took aim at the SEC, pushing Coinbase to take on the regulator.
SEC Promises Nothing More Than Hot Air
Coinbase both shocked and didn’t shock the cryptocurrency world yesterday when it revealed that, after spending months trying to work with the SEC in launching Coinbase Lend legally and getting little by way of a helpful response, the SEC had threatened to sue them if the product launched. This led to criticism that SEC chair Gary Gensler’s stated desire to get crypto companies to “come in, talk to us” was nothing more than hot air.
Coinbase CEO Brian Armstrong spelt out the exchange’s perspective in a lengthy tweet thread yesterday where he explained that the SEC informed them that lending would constitute a security, contrary to common sense, before going on to explain how Coinbase tried at every turn to deal with the SEC who merely asked for information (including personal details of those who signed up), launched an investigation and eventually threatened a lawsuit.
1/ Some really sketchy behavior coming out of the SEC recently.
Story time…— Brian Armstrong (@brian_armstrong) September 8, 2021
Coinbase Affair Stirs Hornets’ Nest
Plenty of individuals around the crypto space have responded to Armstrong’s claims. Mark Cuban responded by calling the process “Regulation via Litigation” and accused the SEC of not being “capable of working through this themselves” so they “leave it to the lawyers”. He also added that “You have to go on the offensive”, which is a strategy attempted by Kik founder Ted Livingston that ended in failure and little clarity.
Jerry Brito backed this approach, saying that Armstrong should “should go ahead and launch its product, let the SEC sue, and go to court. Let the SEC make its case and let a judge decide what the law is.” Kraken CEO Jesse Powell argued that the SEC is “beating down good actors because it’s convenient. Meanwhile, actual scams run unabated for years.” Shapeshift founder Erik Voorhees also thanked Armstrong for “opening up about this. Most companies wouldn’t.”
The SEC certainly seems to have stirred a hornets’ nest with this latest action. Their response will be telling as far as their desire to communicate with the crypto space goes.
