Coinbase CEO lays into SEC

[djdhrubs]

lol

[WarChest]

Was just about to post this thread.
 

More evidence that SEC are not fit for purpose.

[BillyOckham]

7 minutes ago, djdhrubs said:

lol

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.

 

[Guest]

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.

[djdhrubs]

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. 

[Guest]

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 ?

[Guest]

2 minutes ago, djdhrubs said:

I genuinely think Gensler believes everything from ethereum down is a security. So offering lending on securities is a no no.

Yep. See my post above (submitted after your reply). Coinbase’s move here still doesn’t make sense to me.

[HAL1000]

For those not on Twitter and trying to understand it all:-

Brian Armstrong (is a billionaire American business executive and investor who is CEO of cryptocurrency trading company Coinbase.)

Some really sketchy behaviour coming out of the SEC recently.
Story time…

Millions of crypto holders have been earning yield on their assets over the last few years. It makes sense, if you want to lend out your funds, you can earn a return. Everyone seems happy. A bunch of great companies in crypto have been offering versions of this for years. Coinbase came out recently and said we would be launching our own version. We were planning to go live in a few weeks, so we reached out to the SEC to give them a friendly heads up and briefing.

They responded by telling us this lend feature is a security. Ok - seems strange, how can lending be a security? So we ask the SEC to help us understand and share their view. We always make an effort to work proactively with regulators, and keep an open mind. They refuse to tell us why they think it's a security, and instead subpoena a bunch of records from us (we comply), demand testimony from our employees (we comply), and then tell us they will be suing us if we proceed to launch, with zero explanation as to why.

Look….we're committed to following the law. Sometimes the law is unclear. So if the SEC wants to publish guidance, we are also happy to follow that (it's nice if you actually enforce it evenly across the industry equally btw). But in this case they are refusing to offer any opinion in writing to the industry on what should be allowed and why, and instead are engaging in intimidation tactics behind closed doors. Whatever their theory is here, it feels like a reach/land grab vs other regulators.

Meanwhile, plenty of other crypto companies continue to offer a lend feature, but Coinbase is somehow not allowed to. Gensler in his confirmation hearing: “It’s important for the SEC to provide guidance and clarity,” Gensler said. “Sometimes that’s a clarity that will be a thumbs up, but even if it’s thumbs down, it’s important to provide that.” March 2, 2021

If you don't want this activity, then simply publish your position, in writing, and enforce it evenly across the industry. Ostensibly, the SEC's goal is to protect investors and create fair markets. So who are they protecting here, and where is the harm? People seem pretty happy to be earning yield on these various products, across lots of other crypto companies. Shutting these down would arguably be harming consumers more than protecting them, and by preventing Coinbase from launching the same thing that other companies already have live, they're creating an unfair market.

In May of this year, I travelled to DC to meet with every regulator and branch of government I could.

I spent most of this week in DC meeting with members of Congress and heads of various federal agencies, along with Ron Conway / Katie Haun and Paul Grewal.

Gensler had been confirmed just a month prior, so I brushed it off as the SEC still getting its feet under it. Now I'm not so sure. We've always tried to be good actors in the space - leaning in to sensible regulation even when it is difficult or expensive. We try to think about what products we would want for ourselves, and what risks we would want our families to be aware of, before launching products. We will keep following this approach.

Yet here, we're being threatened with legal action before a single bit of actual guidance has been given to the industry on these products. If we end up in court, we may finally get the regulatory clarity the SEC refuses to provide. But regulation by litigation should be the last resort for the SEC, not the first.

Our door remains open. Hopefully the SEC steps up to create the clarity this industry deserves, without harming consumers and companies in the process. America could really use us all working together to figure this out right now.

 

That was work - please join Twitter and make my life easier (Hal1000) the copy and paste maniac.

 

 

 

 

Edited September 8, 2021 by HAL1000

[Guest]

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

[WarChest]

 

[HAL1000]

 

[Panopticon]

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

 

Edited September 8, 2021 by Panopticon

[WarChest]

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

 

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. 

 

[Julian_Williams]

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 September 8, 2021 by Julian_Williams

[Guest]

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.