On Wednesday, the United States Securities and Exchange Commission (SEC) added one more crypto entity to its list and targeted one of the largest crypto exchanges, Coinbase. The regulator has been cracking down on several crypto firms in recent times and accused them of violating federal securities laws.
The SEC sent the Wells Notice to the firm which is to inform the receiver of possible enforcement action and also enables firms to respond to the regulator with an explanation as to why the agency shouldn’t proceed with legal action. Following the Wells Notice, the shares of Coinbase global took a deep hit and fell by about 11.5%.
Brian Armstrong, CEO of Coinbase, took to Twitter and acknowledged the Wells Notice from the SEC but also had a very staunch criticism for the regulator and its approach to crypto entities. Now, he has renewed calls for crypto users to “elect pro-crypto candidates.”
In a recording posted by Coinbase on Twitter, Armstrong can be heard saying he would be making efforts to organize the roughly 50 million American citizens who use crypto into a political force.
What we’re going to do is start putting out content where people can contact their congressman, donate to pro-crypto candidates, show up at town halls, make your voice heard. We are going to elect pro-crypto candidates in this country to make sure that our success is ensured.
Armstrong’s call to action was the latest move by the Coinbase CEO representing a change in his stance on mixing business and politics. In September 2020, he wrote a blog post claiming the exchange should not advocate “for any particular causes or candidates internally that are unrelated to our mission because it is a distraction from our mission.”
However, after that blog post from more than two years ago, the firm’s executives have been more and more involved with politics on several matters. In February, Kara Calvert, Coinbase’s head of U.S. policy said:
When you think about 20% of Americans owning crypto, […] those are real voters who care about these races and who can actually make a difference if they show up to vote.
In particular, it is still not clear if the regulator will launch an enforcement action against Coinbase and what are grounds for the action are. Paul Grewal, CLO of Coinbase also echoed Armstrong’s opinion and said that they have “simply been told nothing” regarding which assets or services the SEC may be targeting in his tweet thread.
Sheila Warren, CEO of the Crypto Council for Innovation, criticized the regulator’s approach along with a lot of others from the crypto community. She briefed the media that:
A reprehensible amount of resources and brainpower have been spent in the U.S. trying to engage with this SEC and trying to create substance and a path out of the wraithlike comments issued by the agency. Are we really going to allow one agency in the U.S. to set the entire trajectory of innovation for the entire country, especially if that agency refuses to engage with the industry it is trying to regulate?
The SEC has particularly been carrying a regulation via enforcement approach which has received severe criticism from lawmakers and dignified personalities. Prior to Coinbase, the regulator targeted Kraken and Paxos. Paxos was accused of selling unregistered security which the firm categorically disagreed with and confirmed it is having talks with the SEC.
As pointed out by French Hill, a Republican lawmaker, in his DC Blockchain Summit appearance, the regulator’s approach can be held responsible for driving crypto businesses away and hence there needs to be a more open approach involving perspectives to ensure efficiency.