If it wasn’t already clear enough that SEC chairman Gary Gensler saw most crypto tokens as securities from multiple times he said this, two weeks ago the SEC started walking instead of just talking. He accused the former Coinbase product manager of insider dealing, and in his complaint listed nine specific tokens as unregistered securities.
It appears to be the biggest crypto news this summer so far with the broadest ramifications for the industry.
The nine tokens are AMP, Rally (RLY), DerivaDEX (DDX), XYO, Rari Governance Token (RGT), LCX, Powerledger (POWR), DFX, and Kromatika (KROM). The first seven are listed on Coinbase for trading. (DFX and KROM were in Coinbase’s internal spreadsheet containing the tokens it planned to display but never did.)
The nine designs behind these tokens were clearly silent in response to the SEC’s fingering. Coinbase doesn’t.
A Coinbase blog entry with the response of Legal Director Paul Grewal read: “Coinbase does not exchange securities. End of the story”. Grewal wrote: “None of these assets are securities. Coinbase has a rigorous process of analyzing and reviewing each digital asset before making it available to our exchange… this process includes examining whether the asset qualifies as a security. “
But of course that is not the end of the story. This is just the beginning. Gensler won’t say, “Oh, whatever, Coinbase says they’re not securities.”
Binance, in response to its SEC token list, retired AMP, the only one of nine listed on Binance US. He said he was doing it out of “over-caution.” This was an effective trolling from rival Coinbase that cannot afford to remove any of the tokens.
The last time the Securities and Exchange Commission appeared after Coinbase on a specific product or asset was a year ago when it threatened to sue if Coinbase moved forward with its planned high yield loan offer. Meanwhile, Ripple CEO Brad Garlinghouse, who has been battling the SEC since 2020, tweeted the meme “Die Hard” for Coinbase CEO Brian Armstrong: “Welcome to the party, mate.” Mark Cuban also called on Armstrong to “go on the offensive.”
But 13 days after the SEC threat, Coinbase gave up and abandoned the product.
This time, the company cannot pull back that quickly. A withdrawal of tokens from the exchange, a Coinbase source told me, would “undermine our entire position.”
On the same day, the SEC marked nine token securities, Coinbase filed a “regulatory petition,” urging the agency to come up with a new regulatory framework for digital assets. Coinbase’s FTX rival wants the same; all exchanges they do.
In an interview on Friday with FTX CEO Sam Bankman-Fried for the next episode of our gm podcast, I asked for nine tokens.
“The most I would like to see is a regulatory framework, a framework for registration forms that will come out for both platforms and assets, and I am optimistic that we will see some of the many agencies next year,” he said. “That doesn’t mean you can’t make decisions in the meantime. That doesn’t put you in a position where you can’t judge what it is… and it’s very intentional that we’ve traded fewer FTX US tokens than many platforms. “
That sounds like a bit of a shadow in Coinbase for listing so many tokens in the first place, a strategy that has brought the company a lot of criticism for opening its gates to so many “shitcoins”. But now Coinbase has to stick to his approach and challenge Gensler on behalf of his colleagues.
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