On Friday, August 4, the chief executive of Coinbase, Brian Armstrong, announced that the crypto exchange would not exit the US market despite the ongoing regulatory uncertainty. The CEO told the Financial Times that the crypto exchange would continue operating in the US regardless of the regulatory pressure battling the crypto sector.
Unlike other crypto exchanges fleeing the “hostile” US market to seek suitable opportunities overseas, the Coinbase team plans to persevere in the intensive regulatory crackdown on the crypto sector. In his report, the Coinbase CEO confessed that the crypto exchange lacked a “break glass plan” and there was no possibility the firm could exit the US.
Armstrong’s statement pointed out that in case of an emergency, the embattled crypto exchange will continue to operate in the US.
Coinbase to Persevere SEC Regulatory Pressure
Recently the Coinbase team was sued by the US Securities and Exchange Commission (SEC) for violating the securities laws. The SEC’s legal action against Coinbase has exposed the firm to potential threats from around ten regulatory agencies.
In most cases, the regulators questioned the legality of the staking products offered by Coinbase. In June, regulators from 11 states issued a cease and desist order to Coinbase. As the regulatory pressure escalated, the crypto exchange confirmed plans to relocate the head office outside the US.
Speaking at the Fintech conference held in London, the Coinbase team lamented that the US lacks regulatory clarity on crypto assets.
In May, the CEO expressed optimism that the members of Congress will formulate a comprehensive rulebook on crypto assets. Armstrong reaffirmed that Coinbase is “100% committed to exploring the US market” despite the regulatory tussle.
Months before the conference, the SEC had issued a Well Notice to Coinbase after suspecting that the crypto exchange violated the securities laws. In the report, the SEC accused Coinbase of offering unregistered securities.
Coinbase Violates Securities Regulations
A well notice refers to a report issued by the regulators warning a firm that regulators intend to take enforcement action due to violation of federal laws. On June 6, the SEC filed charges against Coinbase for offering unregistered securities.
After probing the operation of the controversial crypto exchange, the regulators observed that staking products, including Coinbase Earn and Coinbase Prime, violated the securities regulations.
Later the SEC listed 13 crypto assets, including Polygon, Solana, Nexo, The Sandbox, Voyager, and others as securities. News concerning listing of best-performing tokens compelled crypto firms to challenge the SEC decision.
Coinbase Challenge SEC Ruling
At the beginning of July, Solana, Polygon Labs, and Cardano vehemently rejected the SEC classification of ADA, SOL, and MATIC as securities. In the report, the SEC argued that most crypto assets except Bitcoin were securities.
Earlier, the SEC had charged the Ripple top executives for offering unregistered securities. The market regulators requested the court to suspend Ripple from offering XRP tokens which fell under the security category.
On July 13, Judge Analisa Torres issued the court judgment summary confirming Ripple’s partial win over SEC. Judge Torres announced that Ripple’s native token, XRP, was considered not a security under the existing crypto regulations.
Citing Judge Torres’ decision on Ripple’s lawsuit, the Coinbase legal team filed a motion on August 4 urging the court to dismiss SEC charges. The American crypto exchange argued that the market regulators violated due process, and contravened with current discretion.
The Coinbase legal team also stated that the SEC abandoned its previous interpretation of securities regulations.
In a separate report, Coinbase chief legal officer Paul Grewal argued that the crypto exchange does not offer investment contracts. He condemned the SEC enforcement action due to its punitive nature.