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Coinbase CEO: we're preparing to go to court with the U.S. SEC

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Re: Coinbase CEO: we're preparing to go to court with the U.S. SEC

#51

Post by rumdonut »

Workaccount2 wrote: post #12

How much of this is actually opaque regulation, and how much is "we don't like the rules the SEC has, so we are going to do our best to not understand them"?

I get the strong sense of the latter. It’s not actually the SEC that decides what’s illegal or not - these charges they speak of are for the judicial branch to decide on. I don’t follow crypto much, but it sounds to me like there isn’t a legal ruling precedent yet for crypto securities (hence Coinbase’s broadcast lack of certainty), so how could the SEC even give a guidance as to what’s illegal or not when they don’t know yet? But it’s definitely their duty to find out and establish that legal precedent. Given Coinbase is thinking about moving out of the country, I suspect they actually do think it’s not going to go in their favor, and might be trying to publicly blame it on the SEC versus admit they could have an illegal business model. Even in that case, I don’t understand the complaint because they got a good run - if the SEC had been faster and clearer up front, that party may never have happened.

Re: Coinbase CEO: we're preparing to go to court with the U.S. SEC

#52

Post by mfer »

Alex3917 wrote: post #35
jedberg wrote: post #24

Earlier quoted context omitted.

Coinbase has asked them many times though. The article even mentions this. They met 30 times to seek clarity on the rules.

This reminds me a lot of a different Armstrong repeatedly saying that he couldn’t be doping because he was the most drug-tested athlete in history. In reality, the law is perfectly clear and hasn’t changed in decades, so what would giving clarity even mean?

Clarity can include explaining how some laws apply in situations relevant to Coinbase or crypto currencies. Sometimes dots need to be connected.

Re: Coinbase CEO: we're preparing to go to court with the U.S. SEC

#53

Post by robopsychology »

arcticbull wrote: post #49
rekttrader wrote: post #32

Earlier quoted context omitted.

The sec is not a supervisory agency, they’re a regulator meaning they step in after the fact for investor protections. The sec had plenty of open sessions where folks in the industry would ask for guidance and yet it was not gotten because they don’t tell the capital or crypto markets what should be in the markets they’re here to pull down the things that shouldn’t be. The sec allows “junk bonds” if you disclose the…

> That’s a FAAAAAAAAAAR more speculative asset than crypto and yet it still trades at higher volume than crypto does. The difference is that most volume in crypto is fake, and the price is controlled by a small cartel of exchange owners and an $82B Bahamian counterfeiting operation whose 'bank' is run by the creator of Inspector Gadget. That's the risk that's not disclosed.

If the price is controlled why does it drop so much?

Re: Coinbase CEO: we're preparing to go to court with the U.S. SEC

#54

Post by WrtCdEvrydy »

deadbolt wrote: post #26
arcticbull wrote: post #13

Earlier quoted context omitted.

The definition of a security is found in the application of the Howey test. The SEC has a nice long explanation of how you apply Howey to crypto. Basically every token is a security. Always has been. With the possible exception of Bitcoin due to the way it was initially distributed. [1] [1] https://www.sec.gov/files/dlt-framework.pdf

What was unique about the initial distribution of Bitcoin when compared to other cryptocurrencies?

no pre-mine I believe.

Re: Coinbase CEO: we're preparing to go to court with the U.S. SEC

#55

Post by agentgumshoe »

Workaccount2 wrote: post #12

How much of this is actually opaque regulation, and how much is "we don't like the rules the SEC has, so we are going to do our best to not understand them"?

All of it from what I understand. I think the gist is Coinbase are saying "our product is special and not something you regulate." The SEC is saying it is not a special product, we'll regulate it as we already do. Saying you're using Monopoly money instead of real dollars (but then actually using real dollars to determine value) doesn't magically create new regulatory worlds.

Re: Coinbase CEO: we're preparing to go to court with the U.S. SEC

#56

Post by exabrial »

Can I pay for a Starbucks Double Frap Latte with Apple stock? Probably not, Apple stock is a security, not a currency... I'm sure someone has tried. But can I use Apple Stock as an investment vehicle? Yes.

Conversely, can I pay for said surgary drink in DodgeCoin? Well no, you can't, but not for the same reasons. Starbucks doesn't have the facilities to accept DodgeCoin. Can you use it as an investment vehicle? Yes.

And that is crux the problem. Because the answer is {"No", "Yes"}, the SEC has determined that these things (crypto) are regulated as Securities. The problem is it's far more nuanced than that. Just because everyone is using them as securities instead of currencies, does that make them securities?

Re: Coinbase CEO: we're preparing to go to court with the U.S. SEC

#57

Post by darksaints »

The SEC are constantly stepping out of bounds and refuse to offer clear guidance on the security vs non-security issue. There is a pretty clear reason for this...they have long had a turf war with the CFTC, and if they admit something is not a security, that instrument is no longer within their jurisdiction. The SEC chairman has even publicly admitted that he doesn't think the CFTC needs to exist, and that the SEC should handle all fin regulation. A recent example of this was when they wanted regulatory authority over forex, so they banned any brokerage that handled securities from allowing forex trading as well.

The SEC has lost four out of the last five Supreme Court cases on cryptocurrency. They are out of their depth. Regulatory authority should be handed to the CFTC. They are more than competent enough to be able to clearly state when a cryptocurrency is acting as a security, and have shown that they are the more rational side in this turf war.

Re: Coinbase CEO: we're preparing to go to court with the U.S. SEC

#58

Post by nyolfen »

lumost wrote: post #6
traveler01 wrote: post #3

Earlier quoted context omitted.

Depends on what you consider a "Security". Are "Securities" meant to be used as currencies?

Are virtual currencies actually being used as currencies? I've been long BTC for ~10 years, I've only made a few small novelty purchases through BTC. Based on any ads I've seen for crypto from coinbase, along with the tools they've built into their app - the primary use case for crypto appears to be as a security.

i run a small retail shop that sells digital goods for btc. i bought a book with btc two months ago. more convincingly, it's widely used for remittances and as a store of value in countries with debased currencies -- this is a powerful tool for ordinary citizens in countries like venezuela, argentina etc to discipline central banks who would otherwise steal their savings.

Re: Coinbase CEO: we're preparing to go to court with the U.S. SEC

#59

Post by lallysingh »

0zemp1c wrote: post #7

I actually agree with Armstrong here - the SEC has had plenty of time to assess the market for crypto products and offer clear rules...it almost feels like the indecisiveness is an intentional policy used to cow the industry.

I don't think the SEC can do much here, honestly. It's like asking a cop "is this illegal?" For stuff like murder they can say yes. For complicated issues like picking up your kid on Feb 29 when your ex complains about custody agreements only defined for non-leap-years, "we'll arrest and charge you for it, but there's a 50% shot it gets thrown out of court."

There's enough wiggle room between what each crypto product does and the original intent of the law, that this is really asking for a court case to resolve the matter. Hopefully with something clearer than "Apply Howey to this."

The court may end up saying "purely mined currencies aren't securities as long as they don't have X capabilities, ICOs are securities, etc."[0] Which would be very helpful.

[0] I have no idea what they'd actually say, or if the example is reasonable.

Re: Coinbase CEO: we're preparing to go to court with the U.S. SEC

#60

Post by jcranmer »

sebzim4500 wrote: post #18
this_user wrote: post #9

Earlier quoted context omitted.

Just because you claim something is a currency, doesn't make it one, especially if it doesn't even exhibit the properties of a currency. But the question of what is a "security" has been clearly answered in 1946: > For purposes of the Securities Act, an investment contract (undefined by the Act) means a contract, transaction, or scheme whereby a person invests his money in a common enterprise and is led to expect pro…

A lot of people buy houses thinking they will increase in value. Good to know they've all been doing securities fraud.

Real estate fails the "common enterprise" and "... derived from the efforts of others" prongs of the Howey test. If you decided to package real estate investment into something like a REIT, well, then you have a security. But if you're a homeowner buying a house (even a second or third house you intend to rent out), that's not a security.
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