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Coinbase issued Wells notice by SEC

305 points by Krontab 4y ago

miohtama 4y ago
Here are comments from the Coinbase CEO https://mobile.twitter.com/brian_armstrong/status/1638654192138199041 https://mobile.twitter.com/brian_armstrong/status/1638654192... Here are comments from the Coinbase legal https://mobile.twitter.com/iampaulgrewal/status/1638660032324829184 https://mobile.twitter.com/iampaulgrewal/status/163866003232... Here is some commentary on Bloomberg https://archive.ph/tXiOm https://archive.ph/tXiOm Here are some earlier comments from Mr Gensler: “Come in and talk to us” https://cointelegraph.com/news/sec-chair-doubles-down-tells-crypto-firms-come-in-and-talk-to-us https://cointelegraph.com/news/sec-chair-doubles-down-tells-...
- est31 4y ago
  Other thread: https://news.ycombinator.com/item?id=35267407 https://news.ycombinator.com/item?id=35267407
- 3np 4y ago
  Relevant Coinbase blog post (2022): https://www.coinbase.com//blog/coinbase-does-not-list-securities-end-of-story https://www.coinbase.com//blog/coinbase-does-not-list-securi...
paulpauper 4y ago
wow..down 20% today (8% +12 AH) It's like as if it was not bad enough already, things just keep getting worse. Silvergate, First Republic, Signature, and so on. BTC breaking $29k, which was the long-standing support, in June 2022 was the first domino to fall. After that, things just kept going downhill. Many firms, individuals had leveraged positions that were dependent on $29k support holding. When it broke, all hell broke loose. 3AC was the first to fall. Then others followed, like FTX.
- miohtama 4y ago
  Only that it’s banks falling this time. Damn crypto, ruining American economy.
- Aaronstotle 4y ago
  It was ~$40 per share in December
- yieldcrv 4y ago
  Except bitcoin just retraced nearly to $29k today, before dropping to $27.5k with all risk-on assets after the Fed rate decision today. Why bother grasping at straws from a week ago or 9 months ago as if its a precursor to anything. All these unrelated things that you retroactively combine. Just let things shake out. The SEC's actions have nothing to do with the Fed's, mismanaged banks, the White House report or anything.
tzm 4y ago
> "We asked the SEC specifically to identify which assets on our platforms they believe may be securities, and they declined to do so." Sums up the case quite well.
- arcticbull 4y ago
  Nah, the answer is all of them except Bitcoin. I think all parties to this Wells-based conversation know that and Coinbase is just posturing for the court of public opinion. [edit] I should say, Coinbase has been preparing for this forever. They acquired a broker-dealer license years ago, back in 2018. [1] [1] https://brokercheck.finra.org/firm/summary/151143 https://brokercheck.finra.org/firm/summary/151143
  - meowkit 4y ago
    This begs the question of what differentiates Bitcoin? Besides being the first, there aren’t really any structural differences for the functionality or the development and marketing of BTC than other coins. The only sufficient argument I see is the naivety around the distribution method which implies a metric of decentralization. To me that implies other coins should not be considered securities if they pass some decentralized metric threshold. Now I’m also of the radical opinion that securities are actually a type of token (tokens being a general class of financial instruments like coins, securities, currency, or any asset) - not the other way around, and the law needs to be rewritten to accommodate this.
    - copumpkin 4y ago
      It's different in that nobody can control it. Everything since bitcoin has had some form of leadership, including Ethereum, that can reasonably consistently get the network to fork and cause things to happen. Bitcoin struggled for years to get a change adopted that most of the community thought was a good one, because nobody, not even Satoshi if they are still around, could change it.
      - idiotsecant 4y ago
deleted 4y ago
[deleted]
justinzollars 4y ago
[flagged]
vyrotek 4y ago
Interesting coincidence. From yesterday: "Cathie Wood of ARKK sold 160,887 shares of Coinbase, COIN, today." https://twitter.com/unusual_whales/status/1638334927623311360 https://twitter.com/unusual_whales/status/163833492762331136...
- latchkey 4y ago
  I don't know why you're getting downvoted, but this is massively relevant. She sold before anyone else knew this was coming.
  - robocat 4y ago
    Perhaps because at present we only know they sold ~2% of their stake. If they knew COIN was about to drop 15% to 20% (based on after market price) I would hope they would have sold off far more than 2%.
- TheBlight 4y ago
  >After the sale, ARK holds nearly 1.6 million Coinbase shares bought in 2023. The shares are worth more than $132 million at the time of writing. https://cointelegraph.com/news/cathie-wood-s-ark-sells-coinbase-stock-for-the-first-time-in-2023 https://cointelegraph.com/news/cathie-wood-s-ark-sells-coinb...
- femiagbabiaka 4y ago
  The entire executive staff has been purely selling for months. xD
  - robocat 4y ago
    Citation? Or where do I look for that information?
    - femiagbabiaka 4y ago
      https://twitter.com/unusual_whales/status/1638684466955849728?s=20 https://twitter.com/unusual_whales/status/163868446695584972...
brrrrrm 4y ago
> be tied to aspects of the company's ... Coinbase Earn "Commodity linked securities are investment instruments or securities that are linked to one or more commodity prices. Unlike commodities, which provide no income to the owner, commodity linked securities usually give some payout to holders."[1] [1] https://corporatefinanceinstitute.com/resources/commodities/commodity-linked-securities/ https://corporatefinanceinstitute.com/resources/commodities/...
djbusby 4y ago
Is this why the payout (interest) on $ALGO stopped?
latchkey 4y ago
In case you're wondering if the system is rigged, she obviously knew this was coming... https://www.coindesk.com/business/2023/02/23/cathie-woods-ark-buys-over-13m-of-coinbase-shares/ https://www.coindesk.com/business/2023/02/23/cathie-woods-ar... and then yesterday... so convenient... https://www.businessinsider.in/stock-market/news/cathie-woods-ark-invest-dumps-13-5-million-of-coinbase-stock-as-crypto-exchange-notches-7-month-highs/articleshow/98919340.cms https://www.businessinsider.in/stock-market/news/cathie-wood... Down 8.16% today... https://finance.yahoo.com/quote/COIN/ https://finance.yahoo.com/quote/COIN/
- paulpauper 4y ago
  Hmm her fund has gotten totally clobbered since early 2021. If she were truly privy to insider info, why would her fund do so bad? Or put it another way, after being wrong so often, maybe she is bound to get something right by chance (stopped clock theorem)?
  - latchkey 4y ago
    IMHO, the timing is far too convenient for someone who has had a terribly performing fund. You'd think she would have sold tomorrow instead.
    - overthrow 4y ago
      A broken calendar is right once a year.
      - sebzim4500 4y ago
        Unless you also look at the day of the week, in which case it is right every 7 years.
  - nonethewiser 4y ago
    > Hmm her fund has gotten totally clobbered since early 2021. If she were truly privy to insider info, why would her fund do so bad? The claim is she knew about this information based off the timing of the trade. It’s not evidence but it’s certainly suspicious. It does not follow that she would necessarily know enough other information to perform well. That’s a much higher bar, especially when tech has been pretty deep in the red.
dgrin91 4y ago
I got a notice today from Coinbase that my staking was being disabled at the end of march, but no hint as to why. I guess this is why.
user3939382 4y ago
The banks, which control the government, aren’t going to allow some private company or protocol to replace their control of money.
- skybrian 4y ago
  The government controls the banks in much the same way they’re attempting to control Coinbase. You don’t ask the SEC what’s legal, you’re supposed to hire lawyers that are good at predicting what government regulators will approve of and do what they say. If a bank does something that regulators don’t much like then they’ll shut it down rather than trying to save it. (As happened with the crypto-friendly banks.)
pazimzadeh 4y ago
> Feb. 9, 2023 — Kraken to Discontinue Unregistered Offer and Sale of Crypto Asset Staking-As-A-Service Program and Pay $30 Million to Settle SEC Charges https://www.sec.gov/news/press-release/2023-25 https://www.sec.gov/news/press-release/2023-25 What's the difference between Coinbase and Kraken?
- kragen 4y ago
  armstrong's iron balls
  - reducesuffering 4y ago
    Coinbase is losing $2.6B a year. Seems like he has to make a stand somewhere so that his $130m house doesn't get repossessed...
agotterer 4y ago
I wonder if we will see more non custodial staking being introduced to protocols. Love them or hate them, that’s one thing Cardano got right.
josh2600 4y ago
Regulation is a public-private partnership. Most companies in crypto want to be regulated but haven’t been able to reach a shared plateau of understanding with the SEC. One way or another, we’re going to end up with regulation soon.
AlbertCory 4y ago
At a low-earth-orbit level: the government is hostile to crypto. Period. That seems like the best explanation for the SEC's actions. If their goal is to make anyone considering investing NOT do it, then this is the way: just create fear, uncertainty, and doubt. Don't lay down any clear rules anyone can follow. Just communicate: "We hate you."
TimJRobinson 4y ago
Coinbases response: https://www.coinbase.com/blog/we-asked-the-sec-for-reasonable-crypto-rules-for-americans-we-got-legal https://www.coinbase.com/blog/we-asked-the-sec-for-reasonabl... HN Thread: https://news.ycombinator.com/item?id=35269659 https://news.ycombinator.com/item?id=35269659
iambateman 4y ago
Some here have said it’s the SEC who should have a more collaborative spirit. But all of their incentives, job descriptions, and reason to exist are to _enforce laws_ not be chummy with startup executives. The “mean” approach to securities enforcement is what we as a society need…there are far too many scams and people who run them, and those scams seem especially concentrated within the crypto world. After the blitz of NFT’s last year, I hope the SEC is grumpy as hell. It’s not that crypto doesn’t fit within an established legal framework…it _does_. People have been trying to find their way around securities laws forever, but most of those laws because someone got ripped off.
- 1vuio0pswjnm7 4y ago
  In the blog past Coinbase General Counsel asks for "guidance". The guidance for future "crypto entrepreneurs" is going to come from the outcomes of these enforcement actions. CryptoExpert: "We want guidance. We want regulation." SEC: "Your product/service is a security." CryptoExpert: "No it's not!" Damodoran called cryptocurrency "currency made by the paranoid for the paranoid." [paraphrase] Let's be honest, cooperating with the government is not high on the crypto nerd's list of priorities. The "cryptocurrency" concept seems to be based on a mistrust of government-issued currency and a mistrust of government more generally.
  - joefigura 4y ago
    It doesn't seem like the SEC has actually said what Coinbase is doing that is a security, or published regulations on how to determine which digital assets are securities and which are not "The SEC staff told us they have identified potential violations of securities law, but little more. We asked the SEC specifically to identify which assets on our platforms they believe may be securities, and they declined to do so" - https://www.coinbase.com/blog/we-asked-the-sec-for-reasonable-crypto-rules-for-americans-we-got-legal https://www.coinbase.com/blog/we-asked-the-sec-for-reasonabl... Coinbase seems to be trying their best to comply with regulation, but getting nowhere
    - beaned 4y ago
polygamous_bat 4y ago
If you are Coinbase, your primary product is a sort of regulatory arbitrage -- there is legal risk associated with it, and so one of your primary expenses would be an army of lawyers to decide where on the risk-reward curve you would want to be. The army of lawyers is too expensive? Buddy, no one is forcing you to be in this business. Just because you made profits in the earlier years with little to no regulation doesn't mean that government is bound to let you keep making that profit forever. Deal with it like a grown businessperson rather than whining.
- kypro 4y ago
  > Just because you made profits in the earlier years with little to no regulation doesn't mean that government is bound to let you keep making that profit forever. Coinbase has repeatedly asked for clear regulation. If anything your issue should be with the regulators for not regulating, not Coinbase for trying to operate a business responsibly as possible without clear regulation. > Deal with it like a grown businessperson rather than whining. Ah yes, they should just "deal with it" by bribing politicians and hiring an "army of lawyers". Why would anyone whine about that.
  - polygamous_bat 4y ago
    > If anything your issue should be with the regulators for not regulating, not Coinbase for trying to operate a business responsibly as possible without clear regulation. I very explicitly _do not want_ lawmakers to move at the speed of start-ups. Start-ups are there to move fast and break things. Laws are more rigid, and thus NEEDS to take it slow to get a full picture of the risk/reward before legislating. Coinbase, as a start-up, was a pioneer in the shaky legal ground that is cryptocurrencies. They ran the risk of running afoul of a few laws, but made heavy profits in their earlier years (including a huge public market listing) because they took that risk. Now that the risk has materialized, they are crying because they do not want to take ownership of the risks of their operation. Rather, they would like to socialize the losses that they will take by having to finally abide by the regulation. How is that sensible at all? The fat cats behind these "innovators" are increasingly forgetting the fact that every investment ever sits somewhere in the risk/reward curve. They would rather remake the wheel into "government bad/reward" curve, where any risk and losses is covered or subsidized by the government and all the profits flows into private coffers. I would rather they work for their keep, for once in our collective lifetimes.
dang 4y ago
Related ongoing thread: We asked the SEC for reasonable crypto rules for Americans - https://news.ycombinator.com/item?id=35269659 https://news.ycombinator.com/item?id=35269659
TheAlchemist 4y ago
Ah Coinbase ! SEC already told them very clearly that those are securities. Coinbase answer ? "Coinbase does not list securities. End of story" Here is their own answer from a year ago: https://www.coinbase.com/blog/coinbase-does-not-list-securit https://www.coinbase.com/blog/coinbase-does-not-list-securit... They can cry all their want - it's all PR trying to get public support. Kind of like VCs did with SVB deposits insurance..
- mrguyorama 4y ago
  Brian is literally on twitter telling crypto bros to vote these people out. Sounds like they aren't so sure that they aren't selling securities
thepasswordis 4y ago
I can take my money and put it into a slot machine, gamble it on horses, gamble it on sports games. I can buy useless thousand dollar sneakers, I can buy pokemon cards. I can waste my money on absurdly overpriced art, give it to scammy non-profits, donate it to scammy spoiler political candidates. In some states I can use my money to hire hookers, or buy drugs. But if I want to buy crypto, all of a sudden that is a problem and the government needs to come in and "protect" me from it. Why is that, I wonder?
- libraryatnight 4y ago
  I don't know, why is it? Are you sincerely confused and do you think any of the things you listed prior to buying crypto are at all the same thing?
- deleted 4y ago
  [deleted]
- ajhurliman 4y ago
  For better or worse, the US controls international banking. If we lose that, we essentially lose all of our non-military options for intervening in geopolitical situations. Keeping crypto down is sort of in the US's interest.
  - whitepaint 4y ago
    > Keeping crypto down is sort of in the US's interest. The opposite is true (think of USDC). Eventually politicians will get it.
- lelanthran 4y ago
  > I can take my money and put it into a slot machine, gamble it on horses, gamble it on sports games. I can buy useless thousand dollar sneakers, I can buy pokemon cards. I can waste my money on absurdly overpriced art, give it to scammy non-profits, donate it to scammy spoiler political candidates. > In some states I can use my money to hire hookers, or buy drugs. > But if I want to buy crypto, all of a sudden that is a problem and the government needs to come in and "protect" me from it. Why is that, I wonder? If the casinos advertised slot machines as an investment, would you still wonder?
aardvarkr 4y ago
There’s a lot of discussion on what constitutes a Security so I think it’s a good idea to shine a light on this topic. In 1946, SEC v W.J. Howey Co. (328 U.S. 293) ruled the meaning of “security” as used in the provision of § 2(1) of the Securities Act of 1933 defining “security” as : “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 profits solely from the efforts of the promoter or a third party, it being immaterial whether the shares in the enterprise are evidenced by formal certificates or by nominal interests in the physical assets employed in the enterprise.” There are three components: 1. expectation of profits 2. a common enterprise 3. depends “solely” for its success on the efforts of others.
- joefigura 4y ago
  And Coinbase's position is that none of the crypto assets it lists meet that test. For the coins Coinbase lists: - Criteria #2 is debatable - They don't meet criteria #3 - Or they don't meet criteria #4 Lots of coins look like commodities. They represent a digital asset, not ownership in a common enterprise or a loan. Coinbase believes that all of the tokens they list are securities. The SEC will need to tell Coinbase specifically what it believes they are doing wrong. At the very least, if they eventually file suit they will need to make a specific accusation. It feels like a lot of people have knee-jerk crypto=bad reactions. But read their press release - it really sounds like Coinbase is trying their best to comply with U.S. regulation, and the regulators aren't doing their jobs. And last - For digital assets that do look like securities, the SEC provides no way to register them, and thus vaguely implies that Americans can't own digital securities. That's not their decision to make - they either have to do their job and regulate crypto securities, or get congress to ban them.
  - aardvarkr 4y ago
    That’s interesting to hear your perspective. Do you really believe that any given token does not qualify as a common enterprise? Crypto tokens seem to pretty clearly meet that definition. Additionally, if I were to buy any given token and then it gains or loses value without any effort on my part, that would pretty clearly satisfy #3. Not sure what #4 is that you’re referencing
dkrich 4y ago
From afar what appears to be going on here is that the sec did nothing for years and years then ftx blew up and sbf went to jail and within the sec there was fear that they appeared asleep at the wheel. So they oversteered and decided to drum up some complaints to look like they are taking action but in reality probably don’t fully understand the space so aren’t able to clearly articulate a case.
- unicornmama 4y ago
  Enforcement actions historically are cyclical, so there's nothing new here. > so aren’t able to clearly articulate a case. Coinbase's staking programs are likely in violation of securities acts of 1933 and 1934. And they most certainly strike all boxes of the Howey test.
- friend_and_foe 4y ago
  It's not quite even that. The SEC has an interest in setting precedent that expands its regulatory authority as much as possible. They don't want to answer the question "what is a security" clearly because they want to keep their options open. They're likely to hamstring themselves if they do that. Theyre better off doing what theyre doing, saying "99% of cryptos are securities" and being vague beyond that. It gives them regulatory authority over the whole space without restricting their available interpretations, and allows them to selectively enforce. The other side of that is, securities law is bullshit. Whether something is a security or not depends on how it's packaged. If you tell people what a security is clearly, they'll make sure to legalese the technicalities and not sell "securities." The whole concept needs to be rethought, not because of crypto, the problem has always been there, it's just becoming more obvious. As far as them falling asleep at the wheel, they've always done that. Survivorship bias aside, the SEC almost never catches actual fraudulent violations in the wild before disaster. Now, the SEC doesn't prosecute fraud, it sues for civil violations, but it's stated reason for existence is to protect the public. They've successfully done very little of that. What I think is going to happen is it's all going to blow up in their face. Theyre selectively enforcing so as to establish precedent in court favorable to their broadest interpretation of their regulatory authority, as is their prerogative. But I think theyre going to go through a cascade of failed lawsuits due to their public image as a failure and being unwilling to clarify, some of which will set precedent that neuters them in the crypto space. And that's where the securities markets are going, infrastructure wise. Theyre fucking up, and it's going to take a non polarized congress to regulate any of this stuff effectively.
8organicbits 4y ago
There's a really interesting split of opinion on this. I wonder how much that aligns with the commenters personal ownership of cryptocurrecy. If anyone's willing to share their usage with their comment, that may help explain the split. Personally, I had about $50 on coinbase at one point. As I felt that I wasn't "getting" cryptocurrency. Once I was satisfied that it wasn't useful to me I moved almost all of it out, although I still have some "dust" which seems too small to spend. Coinbase seems designed to look like a trading platform, they feature graphs that show historical gains (and IIRC tweak the timelines of those graphs so they are always looking like the trend is up... super scammy...). I've only purchased one thing with coinbase, mostly because I thought that was a good way to move funds out. So personally, I didn't get value and I'm not going to lose money if Coinbase/cryptocurrencies tank. The securities question appears to boil down to three questions: 1. expectation of profits 2. a common enterprise 3. depends “solely” for its success on the efforts of others. For #1, coinbase appears to actively hype that with their "graph goes up" design. Their "learning" tool asserts that many tokens also have utility, but that seems only aspirational. Shouldn't coinbase track which tokens they feature actually have utility, avoid listing any that don't yet have usage, and delist any tokens when it's clear they have no utility? They have the data to assess that. For #2, I'm honestly not familiar with the term. For #3, this seems tied up in #1. If the token has utility, then the coinbase user could "use it" and engage in the market for non-speculative reasons, which should make it go up in value. If there is no utility, then there's nothing the user can personally do to increase the value. But all this seems like a distraction to me. Coinbase seems deceptive to me in how they promote tokens to users. It's clearly a gambling platform that is trying to sprinkle on just enough "utility" to skirt the rules. The law and guidelines will eventually get updated, I don't think coinbase is entitled to SEC clarifications faster than the SEC is ready to share them. SEC is not their personal lawyer. A company trying to skirt the law with careful positioning should understand they are operating a risky business.
- dsco 4y ago
  There’s very little utility in web3 currently, apart from speculation on price appreciation. So in that sense much if not all of it could be securities. On the other hand you’d need to rule on a case by case basis, since future real uses cases might actually pop up. I think this is one of the SEC’s problems - they just technically can’t keep up with the number of new tokens. So instead they try to target exchanges. On the other hand a Forex trading platform isn’t a securities platform - so the case isn’t as clear cut as one would believe.
deleted 4y ago
[deleted]
HPsquared 4y ago
Cryptocurrencies are data protected by a private key. Securities are legally binding agreements protected by the legal system.
not_enoch_wise 4y ago
It’s only fair that companies get the same advance notice of legal action we give to, say, poor suspects of drug crimes.
bilekas 4y ago
> Staking is a process in which cryptocurrency holders volunteer to take part in validating transactions on the blockchain. For me the key word here is `volunteer`. I'm no 'crypto bro' by any means, but can someone tell me why this is against SEC rules ? Or if it explicitly even is ?
- SilverBirch 4y ago
  It's a basic regulated market. Because it's so easy to rip people off with financial products (ponzi schemes etc.) the SEC requires you to register a security if you want to sell it to retail. The registration is quite simple but just ensures they've written in black and white what they're claiming to sell. These regulations exist as a direct result of fraud and shenanigans in the past. All that crypto is saying is "Oh this is something new so it's not covered by regulations", but that doesn't stand up to much scrutiny -the business being conducted may be different, but the financial aspects of these products are fairly standard and come under existing regulations.
  - bilekas 4y ago
    Okay that kind of clear it up, seems like a lapse of good practice then on Coinbase's if I'm understanding right.
- MagicMoonlight 4y ago
  People volunteer for a ponzi scheme too, that doesn’t mean it’s allowed
Sophiex 4y ago
[dead]

305 points by Krontab 4y ago

Here are comments from the Coinbase CEO https://mobile.twitter.com/brian_armstrong/status/1638654192138199041 https://mobile.twitter.com/brian_armstrong/status/1638654192... Here are comments from the Coinbase legal https://mobile.twitter.com/iampaulgrewal/status/1638660032324829184 https://mobile.twitter.com/iampaulgrewal/status/163866003232... Here is some commentary on Bloomberg https://archive.ph/tXiOm https://archive.ph/tXiOm Here are some earlier comments from Mr Gensler: “Come in and talk to us” https://cointelegraph.com/news/sec-chair-doubles-down-tells-crypto-firms-come-in-and-talk-to-us https://cointelegraph.com/news/sec-chair-doubles-down-tells-...

est31 4y ago
Other thread: https://news.ycombinator.com/item?id=35267407 https://news.ycombinator.com/item?id=35267407
3np 4y ago
Relevant Coinbase blog post (2022): https://www.coinbase.com//blog/coinbase-does-not-list-securities-end-of-story https://www.coinbase.com//blog/coinbase-does-not-list-securi...

paulpauper 4y ago

wow..down 20% today (8% +12 AH) It's like as if it was not bad enough already, things just keep getting worse. Silvergate, First Republic, Signature, and so on. BTC breaking $29k, which was the long-standing support, in June 2022 was the first domino to fall. After that, things just kept going downhill. Many firms, individuals had leveraged positions that were dependent on $29k support holding. When it broke, all hell broke loose. 3AC was the first to fall. Then others followed, like FTX.

miohtama 4y ago
Only that it’s banks falling this time. Damn crypto, ruining American economy.
Aaronstotle 4y ago
It was ~$40 per share in December
yieldcrv 4y ago
Except bitcoin just retraced nearly to $29k today, before dropping to $27.5k with all risk-on assets after the Fed rate decision today. Why bother grasping at straws from a week ago or 9 months ago as if its a precursor to anything. All these unrelated things that you retroactively combine. Just let things shake out. The SEC's actions have nothing to do with the Fed's, mismanaged banks, the White House report or anything.

tzm 4y ago

> "We asked the SEC specifically to identify which assets on our platforms they believe may be securities, and they declined to do so." Sums up the case quite well.

arcticbull 4y ago
Nah, the answer is all of them except Bitcoin. I think all parties to this Wells-based conversation know that and Coinbase is just posturing for the court of public opinion. [edit] I should say, Coinbase has been preparing for this forever. They acquired a broker-dealer license years ago, back in 2018. [1] [1] https://brokercheck.finra.org/firm/summary/151143 https://brokercheck.finra.org/firm/summary/151143
- meowkit 4y ago
  This begs the question of what differentiates Bitcoin? Besides being the first, there aren’t really any structural differences for the functionality or the development and marketing of BTC than other coins. The only sufficient argument I see is the naivety around the distribution method which implies a metric of decentralization. To me that implies other coins should not be considered securities if they pass some decentralized metric threshold. Now I’m also of the radical opinion that securities are actually a type of token (tokens being a general class of financial instruments like coins, securities, currency, or any asset) - not the other way around, and the law needs to be rewritten to accommodate this.
  - copumpkin 4y ago
    It's different in that nobody can control it. Everything since bitcoin has had some form of leadership, including Ethereum, that can reasonably consistently get the network to fork and cause things to happen. Bitcoin struggled for years to get a change adopted that most of the community thought was a good one, because nobody, not even Satoshi if they are still around, could change it.
    - idiotsecant 4y ago

deleted 4y ago

[deleted]

justinzollars 4y ago

[flagged]

vyrotek 4y ago

Interesting coincidence. From yesterday: "Cathie Wood of ARKK sold 160,887 shares of Coinbase, COIN, today." https://twitter.com/unusual_whales/status/1638334927623311360 https://twitter.com/unusual_whales/status/163833492762331136...

latchkey 4y ago
I don't know why you're getting downvoted, but this is massively relevant. She sold before anyone else knew this was coming.
- robocat 4y ago
  Perhaps because at present we only know they sold ~2% of their stake. If they knew COIN was about to drop 15% to 20% (based on after market price) I would hope they would have sold off far more than 2%.
TheBlight 4y ago
>After the sale, ARK holds nearly 1.6 million Coinbase shares bought in 2023. The shares are worth more than $132 million at the time of writing. https://cointelegraph.com/news/cathie-wood-s-ark-sells-coinbase-stock-for-the-first-time-in-2023 https://cointelegraph.com/news/cathie-wood-s-ark-sells-coinb...
femiagbabiaka 4y ago
The entire executive staff has been purely selling for months. xD
- robocat 4y ago
  Citation? Or where do I look for that information?
  - femiagbabiaka 4y ago
    https://twitter.com/unusual_whales/status/1638684466955849728?s=20 https://twitter.com/unusual_whales/status/163868446695584972...

brrrrrm 4y ago

> be tied to aspects of the company's ... Coinbase Earn "Commodity linked securities are investment instruments or securities that are linked to one or more commodity prices. Unlike commodities, which provide no income to the owner, commodity linked securities usually give some payout to holders."[1] [1] https://corporatefinanceinstitute.com/resources/commodities/commodity-linked-securities/ https://corporatefinanceinstitute.com/resources/commodities/...

djbusby 4y ago

Is this why the payout (interest) on $ALGO stopped?

latchkey 4y ago

In case you're wondering if the system is rigged, she obviously knew this was coming... https://www.coindesk.com/business/2023/02/23/cathie-woods-ark-buys-over-13m-of-coinbase-shares/ https://www.coindesk.com/business/2023/02/23/cathie-woods-ar... and then yesterday... so convenient... https://www.businessinsider.in/stock-market/news/cathie-woods-ark-invest-dumps-13-5-million-of-coinbase-stock-as-crypto-exchange-notches-7-month-highs/articleshow/98919340.cms https://www.businessinsider.in/stock-market/news/cathie-wood... Down 8.16% today... https://finance.yahoo.com/quote/COIN/ https://finance.yahoo.com/quote/COIN/

paulpauper 4y ago
Hmm her fund has gotten totally clobbered since early 2021. If she were truly privy to insider info, why would her fund do so bad? Or put it another way, after being wrong so often, maybe she is bound to get something right by chance (stopped clock theorem)?
- latchkey 4y ago
  IMHO, the timing is far too convenient for someone who has had a terribly performing fund. You'd think she would have sold tomorrow instead.
  - overthrow 4y ago
    A broken calendar is right once a year.
    - sebzim4500 4y ago
      Unless you also look at the day of the week, in which case it is right every 7 years.
- nonethewiser 4y ago
  > Hmm her fund has gotten totally clobbered since early 2021. If she were truly privy to insider info, why would her fund do so bad? The claim is she knew about this information based off the timing of the trade. It’s not evidence but it’s certainly suspicious. It does not follow that she would necessarily know enough other information to perform well. That’s a much higher bar, especially when tech has been pretty deep in the red.

dgrin91 4y ago

I got a notice today from Coinbase that my staking was being disabled at the end of march, but no hint as to why. I guess this is why.

user3939382 4y ago

The banks, which control the government, aren’t going to allow some private company or protocol to replace their control of money.

skybrian 4y ago
The government controls the banks in much the same way they’re attempting to control Coinbase. You don’t ask the SEC what’s legal, you’re supposed to hire lawyers that are good at predicting what government regulators will approve of and do what they say. If a bank does something that regulators don’t much like then they’ll shut it down rather than trying to save it. (As happened with the crypto-friendly banks.)

pazimzadeh 4y ago

> Feb. 9, 2023 — Kraken to Discontinue Unregistered Offer and Sale of Crypto Asset Staking-As-A-Service Program and Pay $30 Million to Settle SEC Charges https://www.sec.gov/news/press-release/2023-25 https://www.sec.gov/news/press-release/2023-25 What's the difference between Coinbase and Kraken?

kragen 4y ago
armstrong's iron balls
- reducesuffering 4y ago
  Coinbase is losing $2.6B a year. Seems like he has to make a stand somewhere so that his $130m house doesn't get repossessed...

agotterer 4y ago

I wonder if we will see more non custodial staking being introduced to protocols. Love them or hate them, that’s one thing Cardano got right.

josh2600 4y ago

Regulation is a public-private partnership. Most companies in crypto want to be regulated but haven’t been able to reach a shared plateau of understanding with the SEC. One way or another, we’re going to end up with regulation soon.

AlbertCory 4y ago

At a low-earth-orbit level: the government is hostile to crypto. Period. That seems like the best explanation for the SEC's actions. If their goal is to make anyone considering investing NOT do it, then this is the way: just create fear, uncertainty, and doubt. Don't lay down any clear rules anyone can follow. Just communicate: "We hate you."

TimJRobinson 4y ago

Coinbases response: https://www.coinbase.com/blog/we-asked-the-sec-for-reasonable-crypto-rules-for-americans-we-got-legal https://www.coinbase.com/blog/we-asked-the-sec-for-reasonabl... HN Thread: https://news.ycombinator.com/item?id=35269659 https://news.ycombinator.com/item?id=35269659

iambateman 4y ago

Some here have said it’s the SEC who should have a more collaborative spirit. But all of their incentives, job descriptions, and reason to exist are to _enforce laws_ not be chummy with startup executives. The “mean” approach to securities enforcement is what we as a society need…there are far too many scams and people who run them, and those scams seem especially concentrated within the crypto world. After the blitz of NFT’s last year, I hope the SEC is grumpy as hell. It’s not that crypto doesn’t fit within an established legal framework…it _does_. People have been trying to find their way around securities laws forever, but most of those laws because someone got ripped off.

1vuio0pswjnm7 4y ago
In the blog past Coinbase General Counsel asks for "guidance". The guidance for future "crypto entrepreneurs" is going to come from the outcomes of these enforcement actions. CryptoExpert: "We want guidance. We want regulation." SEC: "Your product/service is a security." CryptoExpert: "No it's not!" Damodoran called cryptocurrency "currency made by the paranoid for the paranoid." [paraphrase] Let's be honest, cooperating with the government is not high on the crypto nerd's list of priorities. The "cryptocurrency" concept seems to be based on a mistrust of government-issued currency and a mistrust of government more generally.
- joefigura 4y ago
  It doesn't seem like the SEC has actually said what Coinbase is doing that is a security, or published regulations on how to determine which digital assets are securities and which are not "The SEC staff told us they have identified potential violations of securities law, but little more. We asked the SEC specifically to identify which assets on our platforms they believe may be securities, and they declined to do so" - https://www.coinbase.com/blog/we-asked-the-sec-for-reasonable-crypto-rules-for-americans-we-got-legal https://www.coinbase.com/blog/we-asked-the-sec-for-reasonabl... Coinbase seems to be trying their best to comply with regulation, but getting nowhere
  - beaned 4y ago

polygamous_bat 4y ago

If you are Coinbase, your primary product is a sort of regulatory arbitrage -- there is legal risk associated with it, and so one of your primary expenses would be an army of lawyers to decide where on the risk-reward curve you would want to be. The army of lawyers is too expensive? Buddy, no one is forcing you to be in this business. Just because you made profits in the earlier years with little to no regulation doesn't mean that government is bound to let you keep making that profit forever. Deal with it like a grown businessperson rather than whining.

kypro 4y ago
> Just because you made profits in the earlier years with little to no regulation doesn't mean that government is bound to let you keep making that profit forever. Coinbase has repeatedly asked for clear regulation. If anything your issue should be with the regulators for not regulating, not Coinbase for trying to operate a business responsibly as possible without clear regulation. > Deal with it like a grown businessperson rather than whining. Ah yes, they should just "deal with it" by bribing politicians and hiring an "army of lawyers". Why would anyone whine about that.
- polygamous_bat 4y ago
  > If anything your issue should be with the regulators for not regulating, not Coinbase for trying to operate a business responsibly as possible without clear regulation. I very explicitly _do not want_ lawmakers to move at the speed of start-ups. Start-ups are there to move fast and break things. Laws are more rigid, and thus NEEDS to take it slow to get a full picture of the risk/reward before legislating. Coinbase, as a start-up, was a pioneer in the shaky legal ground that is cryptocurrencies. They ran the risk of running afoul of a few laws, but made heavy profits in their earlier years (including a huge public market listing) because they took that risk. Now that the risk has materialized, they are crying because they do not want to take ownership of the risks of their operation. Rather, they would like to socialize the losses that they will take by having to finally abide by the regulation. How is that sensible at all? The fat cats behind these "innovators" are increasingly forgetting the fact that every investment ever sits somewhere in the risk/reward curve. They would rather remake the wheel into "government bad/reward" curve, where any risk and losses is covered or subsidized by the government and all the profits flows into private coffers. I would rather they work for their keep, for once in our collective lifetimes.

dang 4y ago

Related ongoing thread: We asked the SEC for reasonable crypto rules for Americans - https://news.ycombinator.com/item?id=35269659 https://news.ycombinator.com/item?id=35269659

TheAlchemist 4y ago

Ah Coinbase ! SEC already told them very clearly that those are securities. Coinbase answer ? "Coinbase does not list securities. End of story" Here is their own answer from a year ago: https://www.coinbase.com/blog/coinbase-does-not-list-securit https://www.coinbase.com/blog/coinbase-does-not-list-securit... They can cry all their want - it's all PR trying to get public support. Kind of like VCs did with SVB deposits insurance..

mrguyorama 4y ago
Brian is literally on twitter telling crypto bros to vote these people out. Sounds like they aren't so sure that they aren't selling securities

thepasswordis 4y ago

I can take my money and put it into a slot machine, gamble it on horses, gamble it on sports games. I can buy useless thousand dollar sneakers, I can buy pokemon cards. I can waste my money on absurdly overpriced art, give it to scammy non-profits, donate it to scammy spoiler political candidates. In some states I can use my money to hire hookers, or buy drugs. But if I want to buy crypto, all of a sudden that is a problem and the government needs to come in and "protect" me from it. Why is that, I wonder?

libraryatnight 4y ago
I don't know, why is it? Are you sincerely confused and do you think any of the things you listed prior to buying crypto are at all the same thing?
deleted 4y ago
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ajhurliman 4y ago
For better or worse, the US controls international banking. If we lose that, we essentially lose all of our non-military options for intervening in geopolitical situations. Keeping crypto down is sort of in the US's interest.
- whitepaint 4y ago
  > Keeping crypto down is sort of in the US's interest. The opposite is true (think of USDC). Eventually politicians will get it.
lelanthran 4y ago
> I can take my money and put it into a slot machine, gamble it on horses, gamble it on sports games. I can buy useless thousand dollar sneakers, I can buy pokemon cards. I can waste my money on absurdly overpriced art, give it to scammy non-profits, donate it to scammy spoiler political candidates. > In some states I can use my money to hire hookers, or buy drugs. > But if I want to buy crypto, all of a sudden that is a problem and the government needs to come in and "protect" me from it. Why is that, I wonder? If the casinos advertised slot machines as an investment, would you still wonder?

aardvarkr 4y ago

There’s a lot of discussion on what constitutes a Security so I think it’s a good idea to shine a light on this topic. In 1946, SEC v W.J. Howey Co. (328 U.S. 293) ruled the meaning of “security” as used in the provision of § 2(1) of the Securities Act of 1933 defining “security” as : “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 profits solely from the efforts of the promoter or a third party, it being immaterial whether the shares in the enterprise are evidenced by formal certificates or by nominal interests in the physical assets employed in the enterprise.” There are three components: 1. expectation of profits 2. a common enterprise 3. depends “solely” for its success on the efforts of others.

joefigura 4y ago
And Coinbase's position is that none of the crypto assets it lists meet that test. For the coins Coinbase lists: - Criteria #2 is debatable - They don't meet criteria #3 - Or they don't meet criteria #4 Lots of coins look like commodities. They represent a digital asset, not ownership in a common enterprise or a loan. Coinbase believes that all of the tokens they list are securities. The SEC will need to tell Coinbase specifically what it believes they are doing wrong. At the very least, if they eventually file suit they will need to make a specific accusation. It feels like a lot of people have knee-jerk crypto=bad reactions. But read their press release - it really sounds like Coinbase is trying their best to comply with U.S. regulation, and the regulators aren't doing their jobs. And last - For digital assets that do look like securities, the SEC provides no way to register them, and thus vaguely implies that Americans can't own digital securities. That's not their decision to make - they either have to do their job and regulate crypto securities, or get congress to ban them.
- aardvarkr 4y ago
  That’s interesting to hear your perspective. Do you really believe that any given token does not qualify as a common enterprise? Crypto tokens seem to pretty clearly meet that definition. Additionally, if I were to buy any given token and then it gains or loses value without any effort on my part, that would pretty clearly satisfy #3. Not sure what #4 is that you’re referencing

dkrich 4y ago

From afar what appears to be going on here is that the sec did nothing for years and years then ftx blew up and sbf went to jail and within the sec there was fear that they appeared asleep at the wheel. So they oversteered and decided to drum up some complaints to look like they are taking action but in reality probably don’t fully understand the space so aren’t able to clearly articulate a case.

unicornmama 4y ago
Enforcement actions historically are cyclical, so there's nothing new here. > so aren’t able to clearly articulate a case. Coinbase's staking programs are likely in violation of securities acts of 1933 and 1934. And they most certainly strike all boxes of the Howey test.
friend_and_foe 4y ago
It's not quite even that. The SEC has an interest in setting precedent that expands its regulatory authority as much as possible. They don't want to answer the question "what is a security" clearly because they want to keep their options open. They're likely to hamstring themselves if they do that. Theyre better off doing what theyre doing, saying "99% of cryptos are securities" and being vague beyond that. It gives them regulatory authority over the whole space without restricting their available interpretations, and allows them to selectively enforce. The other side of that is, securities law is bullshit. Whether something is a security or not depends on how it's packaged. If you tell people what a security is clearly, they'll make sure to legalese the technicalities and not sell "securities." The whole concept needs to be rethought, not because of crypto, the problem has always been there, it's just becoming more obvious. As far as them falling asleep at the wheel, they've always done that. Survivorship bias aside, the SEC almost never catches actual fraudulent violations in the wild before disaster. Now, the SEC doesn't prosecute fraud, it sues for civil violations, but it's stated reason for existence is to protect the public. They've successfully done very little of that. What I think is going to happen is it's all going to blow up in their face. Theyre selectively enforcing so as to establish precedent in court favorable to their broadest interpretation of their regulatory authority, as is their prerogative. But I think theyre going to go through a cascade of failed lawsuits due to their public image as a failure and being unwilling to clarify, some of which will set precedent that neuters them in the crypto space. And that's where the securities markets are going, infrastructure wise. Theyre fucking up, and it's going to take a non polarized congress to regulate any of this stuff effectively.

8organicbits 4y ago

There's a really interesting split of opinion on this. I wonder how much that aligns with the commenters personal ownership of cryptocurrecy. If anyone's willing to share their usage with their comment, that may help explain the split. Personally, I had about $50 on coinbase at one point. As I felt that I wasn't "getting" cryptocurrency. Once I was satisfied that it wasn't useful to me I moved almost all of it out, although I still have some "dust" which seems too small to spend. Coinbase seems designed to look like a trading platform, they feature graphs that show historical gains (and IIRC tweak the timelines of those graphs so they are always looking like the trend is up... super scammy...). I've only purchased one thing with coinbase, mostly because I thought that was a good way to move funds out. So personally, I didn't get value and I'm not going to lose money if Coinbase/cryptocurrencies tank. The securities question appears to boil down to three questions: 1. expectation of profits 2. a common enterprise 3. depends “solely” for its success on the efforts of others. For #1, coinbase appears to actively hype that with their "graph goes up" design. Their "learning" tool asserts that many tokens also have utility, but that seems only aspirational. Shouldn't coinbase track which tokens they feature actually have utility, avoid listing any that don't yet have usage, and delist any tokens when it's clear they have no utility? They have the data to assess that. For #2, I'm honestly not familiar with the term. For #3, this seems tied up in #1. If the token has utility, then the coinbase user could "use it" and engage in the market for non-speculative reasons, which should make it go up in value. If there is no utility, then there's nothing the user can personally do to increase the value. But all this seems like a distraction to me. Coinbase seems deceptive to me in how they promote tokens to users. It's clearly a gambling platform that is trying to sprinkle on just enough "utility" to skirt the rules. The law and guidelines will eventually get updated, I don't think coinbase is entitled to SEC clarifications faster than the SEC is ready to share them. SEC is not their personal lawyer. A company trying to skirt the law with careful positioning should understand they are operating a risky business.

dsco 4y ago
There’s very little utility in web3 currently, apart from speculation on price appreciation. So in that sense much if not all of it could be securities. On the other hand you’d need to rule on a case by case basis, since future real uses cases might actually pop up. I think this is one of the SEC’s problems - they just technically can’t keep up with the number of new tokens. So instead they try to target exchanges. On the other hand a Forex trading platform isn’t a securities platform - so the case isn’t as clear cut as one would believe.

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HPsquared 4y ago

Cryptocurrencies are data protected by a private key. Securities are legally binding agreements protected by the legal system.

not_enoch_wise 4y ago

It’s only fair that companies get the same advance notice of legal action we give to, say, poor suspects of drug crimes.

bilekas 4y ago

> Staking is a process in which cryptocurrency holders volunteer to take part in validating transactions on the blockchain. For me the key word here is `volunteer`. I'm no 'crypto bro' by any means, but can someone tell me why this is against SEC rules ? Or if it explicitly even is ?

SilverBirch 4y ago
It's a basic regulated market. Because it's so easy to rip people off with financial products (ponzi schemes etc.) the SEC requires you to register a security if you want to sell it to retail. The registration is quite simple but just ensures they've written in black and white what they're claiming to sell. These regulations exist as a direct result of fraud and shenanigans in the past. All that crypto is saying is "Oh this is something new so it's not covered by regulations", but that doesn't stand up to much scrutiny -the business being conducted may be different, but the financial aspects of these products are fairly standard and come under existing regulations.
- bilekas 4y ago
  Okay that kind of clear it up, seems like a lapse of good practice then on Coinbase's if I'm understanding right.
MagicMoonlight 4y ago
People volunteer for a ponzi scheme too, that doesn’t mean it’s allowed

Sophiex 4y ago

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