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Coinbase CEO lays into SEC


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Just now, BillyOckham said:


I said this privately but I will repeat it here…

Holy crap that’s bad.   When does USA decide that its own enforcers are out of control and killing their own industry?  Not yet apparently.

 

I assumed that once USDC is no longer comprised of corporate debt but only has treasuries or cash backing it, it would be okay to offer this. I’m surprised that this is not the case.

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16 minutes ago, Ripley said:

I assumed that once USDC is no longer comprised of corporate debt but only has treasuries or cash backing it, it would be okay to offer this. I’m surprised that this is not the case.

I genuinely think Gensler believes everything from ethereum down is a security. So offering lending on securities is a no no. The hilarious thing is that the SEC confused everyone in 2018 by making everyone believe they thought Eth wasn’t a security any more. They are now having to backtrack on that opinion, dismissing it as the ramblings of one man’s personal opinion. This is a key component of the Ripple case right now. 
 

Good thing they screwed up there because that’s what I think is preventing Gensler from going after ETH and everything else. 

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Something is off here.

It’s the SEC’s stance (right or wrong) that offering lending programs against assets that are considered securities are also securities. Also, guaranteeing a return (4% in case of Coinbase) could be a security but why is that not the case with a bank ? Do they just need a banking license ?

It is also SEC’s stance that assets that are comprised of securities by even a little bit will be considered securities. I assumed that inclusion of commercial paper in its reserves made USDC a security and that Circle and Coinbase’s announcement about reverting to cash reserves was a reaction to this.

And I assumed that once the cash reserve composition is changed, people would be free to offer yield programs as long as they had language similar to Celsius’s (eg your money, your yield, no guarantees etc).

Coinbase’s new blog post on this also says that they might offer this by “not sooner than October”. So what’s changing by October ? October was when USDC reserves were going to be fully backed by cash. So what’s the motivation behind this public blog ? Are they going to be sued even if they don’t offer the program ?

image.thumb.png.b2483eb4ac2c81d265e65ab60294e951.png

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The Supreme Court’s opinion from the Reves case - “Third, we examine the reasonable expectations of the investing public: The Court will consider instruments to be "securities" on the basis of such public expectations, even where an economic analysis of the circumstances of the particular transaction might suggest that the instruments are not "securities" as used in that transaction.”

Source: http://www.columbia.edu/~hcs14/REVES.htm

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3 hours ago, Panopticon said:

Not much sorry for clownbase really. I've read there was a 404 service error yesterday during the meltdown in BTC, I guess they rekt many people once again with their lack of infrastructure. Maybe they should stop whining and use some small amount of the billions they pocketed from the IPO to improve their services.

PS. David seems to agree with me :lol:

 

I think that the bigger picture, whether or not you have sympathy for Ripple or Coinbase, is that  the SEC are attacking the industry without applying clear and concise rules. That action will hamper progress in the USA through uncertainty. Investors will hold back.

They are like an autocratic King deciding peoples fate on a whim.

I still think that is what Gensler was told to do from above. 

 

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51 minutes ago, WarChest said:

I think that the bigger picture, whether or not you have sympathy for Ripple or Coinbase, is that  the SEC are attacking the industry without applying clear and concise rules. That action will hamper progress in the USA through uncertainty. Investors will hold back.

They are like an autocratic King deciding peoples fate on a whim.

I still think that is what Gensler was told to do from above. 

 

It is indeed strange behaviour.  SEC under Gensler, who comes across in his lectures are approachable, thoughtful and balanced, is behaving in a more and more dysfunctional way.  There is no explaining, and where the explaining happens it is simply open lying or engaging in obstinate authoritarian telling.  We are also hearing stories of lawyers leaving because they are feeling undermined by their boss.

Regulation is a social contract. We consent to regulation, or in authoritarian countries are forced by the military to work by the rules.  People accept authority and regulation only when the regulators are respected.  When they are not respected the regulated find ways of circumventing the regulations and put two fingers up to the regulators they despise.  They move their companies abroad,  invent schemes like money tap or simply commit fraud and just break the rules with others who are also willing to break rules.    Gensler is destroying respect for SEC and the result will be disorder and mayhem, not ordered markets he says he wants. 

I think I saw an article about how institutions Gensler previously ran have fallen on their faces?  The man is clearly incapable of  doing his duty.   There are five commissioners.  Two are already in open revolt.  Maybe a third one will step forward and put an end to this rule by a mad man?

Edited by Julian_Williams
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15 minutes ago, Julian_Williams said:

There are five commissioners.  Two are already in open revolt.  Maybe a third one will step forward and put an end to this rule by a mad man?

Unlikely, because they would have needed 3 votes to move forward with the Wells Notice. The two commissioners who voted with Clayton to go after Ripple must have, at a minimum, gone with Gensler here.

Again, keep in mind that this situation is very different from Ripple’s. There is strong case law from the Supreme Court that promise of a guaranteed return is enough for something to be treated as a security and with Lend, there was an explicit 4% guaranteed return. It’s possible that the other two commissioners also agreed, here.

My view is that the SEC should have worked with Coinbase to repackage Lend so it is a purely speculative product until Congress sorts out the law. I think we need the crypto equivalent of money market accounts and money market funds.

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