Coinbase Global stock could get some good news as the long-awaited remake of the laws governing the crypto industry and digital assets gains momentum.
The House of Representatives is expected to approve a bill that would give the Commodity Futures Trading Commission a leading role in policing digital assets. It is a victory for the crypto industry, which has long bristled at the aggressive enforcement agenda of Securities and Exchange Commission Chair Gary Gensler.
It is also an important moment for Coinbase, which has been one of the biggest proponents of new crypto rules in Washington. The SEC last year sued Coinbase, alleging it operates an unregistered securities exchange, a charge the firm denies.
In a worst-case scenario, a loss to the SEC could force Coinbase to delist some tokens and restrict other products from U.S. investors. That would crimp its earnings. Legislation that clearly put some crypto trading out of the SEC’s remit would obviate some of those concerns.
At the heart of the dispute—and others like it—is what cryptocurrency transactions fall under securities laws. Gensler has repeatedly said the rules are clear and that crypto firms just need to follow them, while Coinbase executives and others have said it is impossible for them to comply with traditional securities regulations.
Advertisement – Scroll to Continue
“The absence of clear rules leads to confusion in the marketplace for companies—and leaves users and consumers unprotected. This lack of clarity impedes innovation and hamstrings companies, harming America’s standing in the global technology race,” wrote the Blockchain Association, an industry trade group, in a Monday letter to House Speaker Mike Johnson (R., La.) and Minority Leader Hakeem Jeffries (D., N.Y.).
The bill that is likely to come to a vote attempts to delineate when tokens fall under the purview of the SEC or the CFTC. Some cryptocurrencies might start out regulated by the SEC but move under the CFTC’s authority once they are proven to be sufficiently “decentralized.”
Coinbase stock has gained 3.4% to $232.98 in premarket trading Tuesday, and is up 29% in 2024.
Advertisement – Scroll to Continue
The bill might not become law soon. Democrats in the Senate have generally been more skeptical of the industry than House lawmakers. The Senate Banking Committee, under Chair Sherrod Brown (D., Ohio), hasn’t yet pushed forward with crypto legislation that could be paired with the House bill.
“The measure faces much longer odds in the Senate as Democrats in Sen. Brown’s Banking Committee have been resistant to constructive dialogue on these issues,” said PolicyPartner analyst Matthew Wholey in a research note.
But the current state of affairs is still the closest the industry has gotten to winning new rules. For the first time, many lawmakers will need to research and take a public position on how they think crypto should be policed, noted Coinbase head of U.S. policy Kara Calvert. Calvert said the vote shows positive momentum for the industry and the impact of an increasing number of crypto holders reaching out to lawmakers.
Advertisement – Scroll to Continue
It might not be enough to get a bill into law this year, but lawmakers are clearly getting more comfortable with crypto again.
Write to Joe Light at joe.light@barrons.com
