Coinbase execs respond to SEC's Wells notice in person and on video

Coinbase founder Brian Armstrong and chief legal officer Paul Grewal spoke about the company’s Wells notice from the SEC on YouTube and at Consensus 2023.

Executives of cryptocurrency exchange Coinbase took their company’s regulatory issues to the public on April 27, with chief legal officer Paul Grewal speaking at Consensus 2023 and appearing with CEO Brian Armstrong in a video released on YouTube.

The appeal was in response to a Wells notice received by the firm, a notification by the United States Securities and Exchange Commission (SEC) that it may intend to carry out enforcement actions against it.

“Coinbase’s core commitment to regulatory compliance has never wavered,” Grewal said in the video, which was addressed to the chair and commissioners of the SEC.

At approximately the same time as the video appeared, Grewal was talking to an audience in Austin at Consensus 2023, where he said:

“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.”

In the video, Grewal argued that Coinbase’s business has not changed in the two years since it was approved for listing on the Nasdaq stock exchange. At that time, Grewal said “the SEC’s position appeared to be that the SEC lacked statutory authority to regulate businesses like Coinbase.”

Grewal attributed the SEC’s new view to FTX. He quoted SEC chair Gary Gensler as saying “I feel that we have enough authority, I really do, in this space.” FTX was “entirely dissimilar” to Coinbase, Grewal added.

Coinbase is already regulated, Grewal said, and mentioned it has a New York state “BitLicense” that prohibits it from listing securities.

“We believe that legislation or rulemaking is needed if the SEC wants to expand its oversight over our industry,” Grewal said. The SEC asked Coinbase last summer to develop a proposal for crypto companies to register if they want to list securities.

The SEC discontinued that discussion before responding to Coinbase’s proposals and a few weeks before the issuance of the “broad but fundamentally vague” Wells notice. “We still do not know exactly what it is that we do that is of concern to the SEC,” Grewal said.

Armstrong talked about his decision to found the company and its early days. He also said:

“We are committed to working within the regulatory perimeter.”

The company does not list securities, he said. He added that the company thoroughly vets its offerings and rejects “some 90%” of the assets they review.

Armstrong also reiterated that Coinbase is prepared to go to court to defend its position. However, “it doesn’t have to come to that. We welcome a true dialog about a workable path forward for our industry.”

Coinbase received a Wells notice, which usually warns of an impending SEC enforcement action, on March 22.

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