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Can anyone summarize what the stakes are here? Is a loss for Coinbase a company-ending event? Or is being forced to register all the coins that aren't BTC or E

Can anyone summarize what the stakes are here? Is a loss for Coinbase a company-ending event? Or is being forced to register all the coins that aren't BTC or ETH a costly regulatory burden? What are the implications of registering all these coins as securities? Does it affect whether they can be offered to non-accredited investors? How expensive is it? Who bears the costs?

civilitty 3y ago
> Is a loss for Coinbase a company-ending event? We don’t do that kind of thing in America except for the occasional Enron when extreme levels of fraud are involved and someone takes out California’s electrical grid to boost profits. IANAL but these SEC violations don’t seem to fit the bill.
- triceratops 3y ago
  See: https://en.wikipedia.org/wiki/Aereo https://en.wikipedia.org/wiki/Aereo The courts found their business model and technology fundamentally illegal.
- paulpauper 3y ago
  how about for-profit colleges . many were forced to shutdown due to lawsuits and major regulation under Obama
- adsfgiodsnrio 3y ago
  "OK, securities exchange, you can continue operating as long as you shut down the securities exchange." I suppose they can keep the office cafeteria open.
habitue 3y ago
The issue is that if most coins are securities, then that means in order to operate, Coinbase has to become a registered securities exchange in order for it to do what it does. The regulations for securities exchanges are onerous, but also many of them aren't possible to comply with for crypto because of how it works. So the SEC is saying "You are an unregistered securities exchange" And coinbase is saying "Please give some kind of route by which we could possibly be compliant given the nature of cryptocurrencies" And the SEC is saying "We have no obligation to give you such a route, just as we have no obligation to provide such a route for criminal black markets" Who you interpret as being unreasonable here depends on if you think crypto is closer to the black market example, or if it's closer to being like regular securities but with a few tweaks to the rules to make it work.
- triceratops 3y ago
  > aren't possible to comply with for crypto because of how it works Why is this? Thanks for the other detail you provided.
  - nickff 3y ago
    The SEC expects the disclosure of various types of information which are impossible to create/state in the case of a decentralized security/commodity/currency like crypto.
    - lokar 3y ago
      I think that is mostly about offering a new security, not acting as a broker.
      - Nursie 3y ago
        Sure, but presumably registered brokers can only deal in registered securities?
        H8crilA 3y ago
        No one is allowed to deal in unregistered securities.
        Nursie 3y ago
        Well true!
        JumpCrisscross 3y ago
        > No one is allowed to deal in unregistered securities All of VC happens with unregistered securities.
        H8crilA 3y ago
paulpauper 3y ago
The stock price would seem to suggest it's a long way from being a company-ending event, otherwise it would be $5 instead of $50. one of the nice things about the EMH is it gives a good heuristic of assessing how important or serious something is, just by looking at how the stock price reacts, without having to understand the actual details. much of the problem has to do with staking.
- hef19898 3y ago
  That's what a lot of people said about Wirecard up to almost the very end.
lokar 3y ago
Even if they loose they could probably still work out a way to broker btc and eth for Americans (as commodities). And also operate in other countries with different regulatory approaches.
LatteLazy 3y ago
Yes. Coinbase would need to immediately stop about 99% of its business. It's not clear how big the fines would be but also likely huge.

civilitty 3y ago

> Is a loss for Coinbase a company-ending event? We don’t do that kind of thing in America except for the occasional Enron when extreme levels of fraud are involved and someone takes out California’s electrical grid to boost profits. IANAL but these SEC violations don’t seem to fit the bill.

triceratops 3y ago
See: https://en.wikipedia.org/wiki/Aereo https://en.wikipedia.org/wiki/Aereo The courts found their business model and technology fundamentally illegal.
paulpauper 3y ago
how about for-profit colleges . many were forced to shutdown due to lawsuits and major regulation under Obama
adsfgiodsnrio 3y ago
"OK, securities exchange, you can continue operating as long as you shut down the securities exchange." I suppose they can keep the office cafeteria open.

habitue 3y ago

The issue is that if most coins are securities, then that means in order to operate, Coinbase has to become a registered securities exchange in order for it to do what it does. The regulations for securities exchanges are onerous, but also many of them aren't possible to comply with for crypto because of how it works. So the SEC is saying "You are an unregistered securities exchange" And coinbase is saying "Please give some kind of route by which we could possibly be compliant given the nature of cryptocurrencies" And the SEC is saying "We have no obligation to give you such a route, just as we have no obligation to provide such a route for criminal black markets" Who you interpret as being unreasonable here depends on if you think crypto is closer to the black market example, or if it's closer to being like regular securities but with a few tweaks to the rules to make it work.

triceratops 3y ago
> aren't possible to comply with for crypto because of how it works Why is this? Thanks for the other detail you provided.
- nickff 3y ago
  The SEC expects the disclosure of various types of information which are impossible to create/state in the case of a decentralized security/commodity/currency like crypto.
  - lokar 3y ago
    I think that is mostly about offering a new security, not acting as a broker.
    - Nursie 3y ago
      Sure, but presumably registered brokers can only deal in registered securities?
      - H8crilA 3y ago
        No one is allowed to deal in unregistered securities.
        Nursie 3y ago
        Well true!
        JumpCrisscross 3y ago
        > No one is allowed to deal in unregistered securities All of VC happens with unregistered securities.
        H8crilA 3y ago

paulpauper 3y ago

The stock price would seem to suggest it's a long way from being a company-ending event, otherwise it would be $5 instead of $50. one of the nice things about the EMH is it gives a good heuristic of assessing how important or serious something is, just by looking at how the stock price reacts, without having to understand the actual details. much of the problem has to do with staking.

hef19898 3y ago
That's what a lot of people said about Wirecard up to almost the very end.

lokar 3y ago

Even if they loose they could probably still work out a way to broker btc and eth for Americans (as commodities). And also operate in other countries with different regulatory approaches.

LatteLazy 3y ago

Yes. Coinbase would need to immediately stop about 99% of its business. It's not clear how big the fines would be but also likely huge.