Coinbase debuted on the U.S. stock market on April 14, 2021 – the same day U.S. senators confirmed Gary Gensler to lead the Securities and Exchange Commission , the country’s top markets regulator.
The escalating tension exploded into public view on Wednesday when Coinbase CEO Brian Armstrong and the company’s chief legal officer Paul Grewal posted online that the firm had been told that SEC staff intend to recommend enforcement action, adding that Coinbase was willing to fight it in court.SEC and Coinbase spokespeople declined to comment. For months, the two have been in discussions over regulation and the agency’s investigation into Coinbase, according to two sources.
The crypto industry believes it operates in a regulatory gray area not governed by existing U.S. securities laws – and that new legislation is needed to regulate the industry. Gensler has raised questions over whether crypto firms rely on a business model that is fundamentally non-compliant with the law, adding that crypto intermediaries provide a range of functions, such as operating as an exchange, broker-dealer, clearing agent and custodian, that should be regulated by the SEC.
Kristin Smith, the CEO of the Blockchain Association, voiced the crypto industry association’s support for Coinbase, noting: “The SEC doesn’t make the law – it only makes allegations, which ultimately must be tested in the courts.”