Coinbase says ‘just no way’ to register with SEC amid calls for compliance

While Securities & Exchange Commission Chair Gary Gensler has called for crypto exchanges to register with the agency, Coinbase (COIN), the largest U.S. crypto exchange, told Yahoo Finance in their view there is no path to registering with the agency.

“We’ve tried, and there’s just no way to do it,” Coinbase chief policy officer Faryar Shirzad told Yahoo Finance in an interview. “In fact, we submitted a petition with the SEC back in June, where we enumerated the specific issues that the agency would have to resolve for crypto platforms to be able to come in and register.”

Shirzad says despite filing a list of questions asking how to register with the Commission, the SEC hasn’t responded to its inquiries.

SEC Chair Gensler told Yahoo Finance back in December his goal for regulating the cryptocurrency space was to bring, “these platforms, the exchanges, the lending platforms…[into] compliance.”

“They can do that appropriately working with the SEC, or we can continue on the course with more enforcement actions,” Gensler said at the time. “And I would have to say that the runway is getting shorter.”

Asked whether the SEC had engaged with crypto firms on this process, Gensler said: “It really is on these entrepreneurs and business leaders in the crypto space.”

In Shirzad’s view, however, the SEC’s talk is not matched with clarity offered to the leaders in the space referenced by Gensler last year.

“When we ask specific questions: How do we get to a path to registration? There’s never an answer,” Shirzad said.

“We think the opportunity to build a crypto securities market in the United States is enormously exciting, but we’ve stayed away from it because there’s no path to registration, and there’s just no way to do it.”

Employees of Coinbase Global Inc, the biggest U.S. cryptocurrency exchange, watch as their listing is displayed on the Nasdaq MarketSite jumbotron at Times Square in New York, U.S., April 14, 2021. REUTERS/Shannon Stapleton

A security-free platform

Asked about the perpetual question on how tokens are categorized, Shirzad maintains Coinbase doesn’t trade securities on its platform.

“We have about 200-plus assets that we list on our exchange. We review every asset before we list it to make sure, among other things, that it’s not a fraud, that it’s cyber resilient, but importantly, we look to see whether [it has the] potential to be treated as a security,” Shirzad said. “If it is, we don’t list it.”

In an amicus brief filed Monday as part of a case against a former employee facing allegations by the SEC of insider trading and securities fraud for leaking information about new token listings on Coinbase, the crypto exchange said the digital assets Coinbase lists are not securities.

But Coinbase, if given proper guidance and rules from the SEC, would like to list securities.

Shirzad says Coinbase consults the so-called Howey Test, a Supreme Court decision the SEC uses to determine whether a particular contract is an investment contract and, therefore, should be treated as a security.

While Coinbase would like to engage with the SEC, the crypto exchange is also looking to Capitol Hill this year for what Shirzad expects will be “significant action towards legislation” in 2023.

“Both sides of the Capitol are very much of the view that we need a regulation around crypto, for crypto commodities, to create a spot market authority at the federal level for crypto securities to essentially encourage the SEC to provide the clarity that it hasn’t itself provided,” Shirzad said.

He also said from Coinbase’s conversations with lawmakers, he expects significant action towards legislation starting “immediately.”

House Financial Services ranking member Maxine Waters told Yahoo Finance in an interview this week stablecoin legislation is “ready to go,” with Democrats and Republicans having resolved most of the outstanding issues.

“I believe the legislation could be passed when we get back to Congress in a few days,” Waters said.

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