> <i>Coinbase, as with most crypto platforms, has decided it wants to simultaneously operate as an exchange, broker-dealer, and clearing agency. These three functions — bringing together securities orders for buyers and sellers, trading securities on behalf of others, and intermediating trades — are typically required to be separate due to conflicts of interest that emerge when one entity controls all of them. Coinbase would need to fundamentally change its business model in order to separate these functions, and thus far seems unwilling to do so. “[Crypto intermediary compliance is] not just a matter of ‘paying lip service to [the] desire to comply with applicable laws’ or seeking a bunch of meetings with the SEC during which you’re unwilling to make the changes needed to comply with the securities laws,” said Gensler in a speech a few days ago.</i><p>Can someone knowledgeable here clarify if this really is the crux of the problem?<p>The previous HN thread seemed to mainly be of the opinion that Coinbase wasn't registering the non-Bitcoin crypto, but that the problem was the SEC wasn't giving clear guidance on whether they needed to be.<p>But I don't understand what ramifications that has. Why didn't Coinbase just register everything non-Bitcoin? Would that have limited/destroyed its business model in the way the quote above suggests?<p>Edit: thank you <i>so much</i> to all the replies so far! This is incredibly helpful.
Sorry for the stupid questions, I really know very little about crypto. With that said,<p>> Gensler firmly maintains that the vast majority of crypto assets are securities, with the exception of Bitcoin<p>Why? From an article on Reuters[1],<p>> Bitcoin is not considered a security because its anonymous and open-source origins mean investor profits are not dependent on the efforts of developers or managers, said Carol Goforth, a law professor at the University of Arkansas.<p>How is this different from, say, Ethereum? What about when changes to the Bitcoin network are done (either directly e.g. bug fixes or indirectly such as hard forking), does this not count as "efforts of developers or managers?"<p>^1: <a href="https://www.reuters.com/business/finance/what-makes-crypto-asset-security-us-2023-06-07/" rel="nofollow noreferrer">https://www.reuters.com/business/finance/what-makes-crypto-a...</a>
It is scary to me how much legislating is done by these government bodies inside the (executive ?) branch.<p>I do sympathize with anyone trying to get clear requirements in black and white terms of what is and isn’t acceptable .<p>I think this is more of a systemic failure.
Can anyone summarize what the stakes are here?<p>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?<p>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?
I like reasoned critiques of crypto. Heck, I think many crypto actors are scammers and should be punished. However, a lot of crypto is legit and this piece reeks of bias. Some examples:<p>- comparison with heroin - wtf? To extend that ridiculous analogy, it would be akin to FDA approving heroin based products (similar to how SEC approved Bitcoin ETF in 2021) and then going after heroin. What message is SEC trying to deliver? That holding Bitcoin via futures-based ETF is okay but crypto itself is scam? Kafka couldn't have invented a better plot<p>- scare quotes when saying “tyrannical” Gary Gensler - tyrannical is an apt description of Gary. See the previous point about kafkaesque treatment. Also see the congressional testimony where the dude didn't even have a clear answer about the status of Ethereum, which is bigger in market cap than 90% of S&P500. Talk about protecting American consumers!
I stopped reading the article when it started comparing cryptocurrency exchanges to the business of selling heroin. No matter your opinion on the issue, that's just alarmist nonsense.<p>I agree that it's reasonable to apply existing securities laws to cryptocurrency, and I agree that "but they let us go public" is a bad argument, but Gensler's SEC has also been intentionally obtuse about how those securities laws should apply to cryptocurrency. It's not a company's job to go to court over ambiguous regulations, it's the SEC's job to actually research what they are regulating and put out a comprehensive framework for how they make their regulatory determinations, because the Howey Test is so subjective that it's leaving companies guessing on the cutting edge of public programmable assets.<p>Look at the UK's upcoming crypto bills for an example of commonsense regulation that protects consumers and is in everyone's best interest. The contrast between it and the US's approach is striking.
I don't understand how anyone can take this obviously super-biased articles from someone who has made it their career to hate anything crypto-related seriously. It's full of personal jabs and bias like "my guess is that it’s going to involve a lot of PR stunts and headline-grabbing"<p>It's obvious that there is zero incentive here to do any real reporting or research. It's just clickbaity headlines and statements appealing to people who hate crypto. Of course it's hidden under a veil of neutrality with a biased selection of links that nobody actually clicks on scattered throughout the article.
The reason why many like crypto is that it's the purest form of speculation. Stocks, pork halves, the $, all are more or less tied to reality and influenced by reality - even gold. Crypto isn't which makes it so beautiful in the eyes of some.
When approving the S-1, the SEC was asked to review a business, not one selling filtration technology, but one selling <i>illegal securities</i>, well within their area of expertise.<p>I think Americans should fairly expect their regulators to be <i>clear</i> enough about the rules that the very <i>securities</i> regulator, whose job in large part it is to protect retail investors, not allow a company who is in the business of selling illegal securities to go public, and then take <i>multiple years</i> to file suit.<p>Any crypto sceptic who does not see a problem with this is tainted by their priors.
- Just because something is a commodity doesn’t mean it’s not a security<p>- just because something is a currency doesn’t mean it’s not a security<p>There’s a reason why we separated exchanges, brokerages and clearing houses. Now it seems Binance is touching customer funds. Perhaps we just can cefi and use defi in crypto. If people want fiat on ramp they get a circle or tether account and redeem there
I'm confused why the SEC is suing specifically over DASH (2014) but not specifically Ethereum (2015).<p><a href="https://www.sec.gov/litigation/complaints/2023/comp-pr2023-102.pdf" rel="nofollow noreferrer">https://www.sec.gov/litigation/complaints/2023/comp-pr2023-1...</a>
Off-topic but addressing the article, text which can be highlighted with a mouse should also be obviously a link (underlined, or in an aqua font in this case) if it functions as a hyperlink.<p>> On June 5, the SEC filed thirteen charges against crypto giant Binance, companies under its control, and its CEO Changpeng “CZ” Zhao. The charges against the companies involve unregistered offers of securities and investment schemes; failing to register with the SEC as an exchange, broker, broker-dealer, or clearing agency; and making materially false and misleading statements to investors. Two of the charges are against CZ specifically, as the control person over Binance and Binance.US.
The point here is that if the SEC is letting illegal businesses go public, it is doing really badly at it's job. If that is the case, it might be legal for the SEC to act that way, it would not make coinbase legal (permission to go public is not a get-out-of-jail-free card), but it would be really really damning for SEC leadership.<p>It would be like a cop giving a speeding ticket to a kidnapper and then letting them go because he's "just on traffic duty". That would be perfectly legal, that would not make kidnapping ok, but I'd still fire the cop for gross gross negligence.
It's not clear to me why almost any of these coins even need to be listed by regulated exchanges.<p>Couldn't they just stick with BTCUSD and a few others then let decentralized exchanges deal with crypto-crypto trade?<p>Would they really lose that much business? I always assumed (though I've never actually checked, it doesn't interest me that much) that almost all of the shitcoins were like, the long tail few % of revenue for these businesses, and it feels like that's where all the risk is, since Bitcoin is generally recognised as a commodity.<p>I mean, if needs must, spin off the shitcoin stuff into its own entity?
<i>Congress has been far from united on the crypto issue thus far, particularly in the wake of the FTX collapse, and the various drafts of legislation that have been proposed have largely been dead on arrival. But Coinbase has put a significant amount of time, effort, and money into lobbying: in 2022, they spent $3.4 million lobbying the crypto industry (on top of Binance’s $1.1 million spent lobbying in the US, all coming together to amount to around $11.9 million in lobbying efforts from the industry that year).<p></i><p>This seems like very little relative to a company worth tens of billions of dollars?
>> “Remember: The SEC reviewed our business and allowed us to become a public company in 2021.”<p>If it's normal for a startup to patch their software to keep up-to-date with changes/time, I wouldn't be surprised if SEC / Gov / Justice Dept updated their Views/Position with time!
Look guys, people are allowed to write articles with an opinion you disagree with. If you want to tell us all you stopped reading when a comparison was that you feel is unfair take a moment to reflect that really, that just makes you look silly and tells us nothing about the article. It's honestly the weakest form of critique.<p>I think she raises some really salient points, and it looks extremely bad that the CEO of Coinbase is making clearly specious arguments. I don't believe the SEC's approval of his filing says anything about the regulations around this securities law. I think he thinks he can win some cheap PR points with people who don't know any better. Acting like that does indicate that he probably doesn't have any real defense. People don't make bad arguments if they have good ones available to them.
All other arguments aside: the bottom line is that everyone who invested in crypto did it with the knowledge that Coinbase wasn't a securities broker.<p>The SEC just can't imagine a world where customers are fine without their 'protection'. We don't want your help, we don't need your help. GO away.
So we're killing crypto again. Okay! This time around just buy some while it's cheap. You may learn a thing or two. About finance, and about yourself.<p>At 50k you remembered checking it when it was 25k, and regretted not buying. Well, it's 25k again, lucky you!<p>But wait! Is this me trying to help you? Shill my bags? Or trying to reverse-psyops you into staying a nocoiner? Take your pick!