Bitcoin Dominates During A Crackdown On Crypto
Coinbase receives a Wells Notice from the SEC, signaling potential violations for offering unregistered securities. Bitcoin price starts decoupling from altcoins. A new trend or repeat of past cycles?
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The Crackdown On Crypto Intensifies
On Wednesday evening, Coinbase, the preeminent North American crypto exchange, announced that the company had received a Wells Notice from the Securities and Exchange Commission, signaling the regulator’s intent to bring enforcement action against the company.
The Coinbase news comes during a flurry of recent enforcement action by the SEC, but this announcement in particular took many by surprise. Coinbase is known as the “gold standard” of the crypto industry and the company has been open and transparent about its desire to communicate with the SEC. Nevertheless, a Wells Notice has been issued, which warranted this response from Coinbase:
In the blog post, Chief Legal Officer Paul Grewal detailed the company’s ongoing dialogue with the SEC and outlined the oversight agency’s recent actions, regarding an undefined portion of listed tokens, the Coinbase staking service, Coinbase Earn, Coinbase Prime and Coinbase Wallet.
Grewal explained how Coinbase had attempted to engage with the SEC in good faith, stating, “We've always tried to be good actors in the space — leaning into sensible regulation even when it is difficult or expensive.” Despite their efforts, Coinbase received a Wells Notice from the SEC, suggesting potential enforcement actions against the company.
The blog post highlights the lack of clarity in the SEC's approach, with Grewal noting, “Rather than get that clarity, the SEC has told us they consider Lend to involve a security, but they haven't explained why.”
The basis of most of the frustration from Coinbase came not from the enforcement action itself, but rather the continued lack of clarity that led up to the enforcement action.
“Tell us the rules and we will follow them. Give us an actual path to register, and we will register the parts of our business that need registering. In the meantime, the U.S. cannot afford for regulators to continue to threaten the good actors in the crypto industry for doing the same legal and compliant things they’ve always done. This unfair approach will only drive innovation, jobs, and the entire industry overseas. At our core, we are the very same company that we were on April 14, 2021 when we became a public company at the end of the lengthy process with the SEC itself. We remain confident in the legality of our assets and services, and if needed, we welcome a legal process to provide the clarity we have been advocating for and to demonstrate that the SEC simply has not been fair or reasonable when it comes to its engagement on digital assets.” — Coinbase
Coinbase isn’t the only one to find themselves at the wrong end of SEC enforcement in recent weeks. Sushi labs, the core team behind the UniSwap fork SushiSwap, which is an altcoin protocol that allows for altcoins to be swapped for one another using an automated market maker, announced that they were hit with an SEC subpoena.
Interestingly, the response from Sushi was to announce the launch of a legal defense fund, which is quite the interesting paradox…
If a “decentralized protocol” can raise a legal defense fund to defend itself in the courts, was it really even a decentralized protocol?
Anyway, the developments of the first few months of the year, following a historic fiasco in the crypto market during 2022, has us thinking that the “industry” as it is known today may be entering an inflection point. We believe this could be beginning to manifest in market pricing.
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The rest of this article is open to paying members only. Here’s what’s behind the paywall 🔏:
Bitcoin dominance in relation to the “leading” altcoins. 💪
Both sides of the argument for another altcoin bull rally. 🐂
How altcoins may operate after a regulatory attack. ⚖️