Coinbase, a cryptocurrency
exchange, has filed a response against the allegations from the Securities
and Exchange Commission (SEC), saying the claims “lack all
merit.” It also argued that even if the SEC’s assertion of regulatory power over its cryptocurrency
services was correct, the watchdog’s action still violates its “due process rights and
constitutes an extraordinary abuse of process.”
In early
June, the SEC filed a lawsuit against
Coinbase, claiming
that the largest crypto exchange in the United States, is operating an
unauthorized trading platform and offers unregistered securities. The financial
watchdog also accused Coinbase of running a digital asset staking-as-a-service
programme without permission.
However, in
its 177-page-long response submitted to the district court
of New York yesterday (Wednesday), Coinbase
said it is not and has never been a securities exchange, broker or clearing
agency. It also argued that cryptocurrencies traded on its platform fall
outside the SEC’s authority because they are not ‘investment contracts’ or assets
pooled from investors to engage in businesses. Without
this obligation, Coinbase’s listed crypto are not ‘securities’ but ‘just an
asset sale,’ the exchange contended.
Today @coinbase filed our answer and notice of intent to file a motion to dismiss the @SECGov case against us. You can read our response for yourself – our arguments speak for themselves. 1/2 https://t.co/Ld2ZEejhyM
— paulgrewal.eth (@iampaulgrewal) June 29, 2023
To support
its argument that its assets listed are not securities, Coinbase
referenced a speech from June 2018 by Bill Hinman, the former
Director of the SEC’s
Division of Corporation Finance. In the speech, Hinman said that a token all by itself is not a security and the sales
of Ether, the second largest cryptocurrency after Bitcoin, were not securities
transactions.
More Defence from Coinbase
Furthermore,
Coinbase, while expanding on its argument that the SEC has no legal power to
supervise its business, pointed to the Chairman of the SEC, Gary Gensler who submitted his testimony before
the US Congress in May 2021. During the testimony,
Gensler said that crypto
exchanges lack a regulatory framework and market regulator.
Meanwhile, the…
