Coinbase (NASDAQ: COIN) has a nice example here of the base problem it faces. As we all know COIN has been trying to do everything by the rules. To work out what is legal to do, get the bureaucracy to agree what’s legal to do and generally do crypto according to the law. Given what so many of the other crypto firms have been doing (FTX being only the most egregious offender, the stories coming out of Binance don’t gladden the heart of any compliance officers) that’s a definite differentiator.
But Coinbase is then facing a problem. Parts of the bureaucracy seem to want crypto to simply go away. To not in fact happen – not in any regulated form at least. The SEC, for example, was insisting that Coinbase should deal in nothing but Bitcoin and Bitcoin alone:
“The US Securities and Exchange Commission asked Coinbase to halt trading in all cryptocurrencies other than bitcoin prior to suing the exchange, in a sign of the agency’s intent to assert regulatory authority over a broader slice of the market.
Coinbase chief executive Brian Armstrong told the Financial Times that the SEC made the recommendation before launching legal action against the Nasdaq-listed company last month for failing to register as a broker.
The SEC’s case identified 13 mostly lightly traded cryptocurrencies on Coinbase’s platform as securities, asserting that by offering them to customers the exchange fell under the regulator’s remit.”
Note what’s happening here. Because “some” alt coins were securities therefore all trading of everything not bitcoin must stop. Bit of a power grab that and not unnaturally Coinbase is going to the courts to see what they say instead of taking the SEC’s word for it.
Coinbase stock price from Google Finance
Ripple had an earlier implication for Coinbase: “We base this not on any great knowledge of the law but rather on politics. There is no great backing for crypto within the bureaucracy that matters, the SEC. Therefore we expect cases to continue to be filed showing that crypto coins are, in fact, securities. Therefore the SEC should regulate them and therefore they need to be registered with the SEC before they are sold. Those who have done that without doing so are therefore going to get it in the neck – sooner or later. Do note that this is a belief, not a fact. A belief driven by our rather jaundiced view of how politics and bureaucracies work – not by anything so detailed as a knowledge of the relevant law.”
We’re neither really in favour of crypto nor against. If decent use cases exist then they’ll be found. If not then it will all fade away but we will still, as a society as a whole, have done the experiment. But we do note that while there is very definitely a Wild West aspect here even the people attempting, like Coinbase, to do it all according to the law are having problems.
The SEC simply doesn’t want there to be trade in things the SEC doesn’t control the trade in. And given the immovability of bureaucratic desires we can’t see much that can be done about that.
