Coinbase executives addressed their company’s regulatory issues in public on April 27, with chief legal officer Paul Grewal speaking at Consensus 2023 and appearing in a YouTube video with CEO Brian Armstrong.
The firm filed the appeal in response to a Wells notice, which was a notice from the United States Securities and Exchange Commission (SEC) that it may intend to take enforcement action against it.
“Coinbase’s core commitment to regulatory compliance has never wavered,” Grewal said in the video, which was sent to the SEC’s chair and commissioners. Grewal was speaking to an audience in Austin at Consensus 2023 around the same time the video went viral, saying, “We are literally sitting up here on stage asking for regulation, asking for rules, asking for a framework that makes sense for our particular technology so that we can be registered.”
Grewal argued in the video that Coinbase’s business hasn’t changed in the two years since it was approved for Nasdaq listing. Grewal stated at the time that “the SEC’s position appeared to be that the SEC lacked statutory authority to regulate businesses like Coinbase.”
Grewal blamed the SEC’s new stance on FTX. He cited SEC chair Gary Gensler as saying, “I feel that we have enough authority, I really do, in this space.” Grewal went on to say that FTX was “completely different” from Coinbase. Grewal stated that Coinbase is already regulated and that it has a New York state “BitLicense” that prohibits it from listing securities.
“If the SEC wants to expand its oversight over our industry, we believe legislation or rulemaking is required,” Grewal said. Last summer, the SEC asked Coinbase to create a proposal for crypto companies to register if they want to list securities.
Before responding to Coinbase’s proposals and a few weeks before issuing the “broad but fundamentally vague” Wells notice, the SEC ended that discussion. “We still don’t know exactly what we do that the SEC is concerned about,” Grewal said.
Armstrong discussed his decision to start the company and its early days. In addition, he stated, “We are committed to working within the regulatory perimeter.” He stated that the company does not list securities. He went on to say that the company thoroughly vets its offerings and rejects “some 90%” of the assets it looks at.
Armstrong also stated that Coinbase is prepared to defend its position in court. “It doesn’t have to come to that,” he says. We welcome a genuine discussion about a viable future path for our industry.” On March 22, Coinbase received a Wells notice, which typically warns of an impending SEC enforcement action.