S.E.C. CAUSES CONCERN AMONGST DEVELOPERS IN CRYPTO SPACE
Regulatory uncertainty is being caused within the crypto market by the S.E.C. and Coinbase. Brian Armstrong the C.E.O of Coinbase went on a twitter tirade showing his frustration with S.E.C. ‘s unclear guidelines and rules for compliance within the crypto industry. Despite Coinbase taking the initiative and reaching out to the S.E.C. According to Brian Armstrong, he went to Washington in May to meet with financial regulators at many agencies. He started the S.E.C. was the only agency who refused to meet with him. The issue stems from Coinbase’s plan to release a stable coin which is a digital currency whose value is tied to the dollar. The name of coinbase’s stable coin is Lend. The Coin offers the benefit of receiving yields on your coins which would be higher than those offered on classic bank accounts. The S.E.C. has accused Coinbase of entering into securities with the project and if this allegation is true, this gives the S.E.C. jurisdiction over the project. Coinbase executives pushed back against the S.E.C. saying that the Lend program doesn’t qualify as a security and that the S.E.C.’S warning surprised them. Lawyers who specialize in securities have and are divided over the S.E.C.’S tactics in going after Coinbase. Some have said that the S.E.C. is being aggressive or to specifically quote Daniel Hawke an Lawyer who represents Arnold and Porter has stated in reaction to the S.E.C’S threat against Coinbase as “sounds aggressive”.
This is ultimately concerning to developers in the industry because when it comes to defining assets in the crypto space it’s difficult due to the custody of the financial instruments on the blockchain and these assets are different from any assets we have had before. Any developer attempting to be innovative has to worry about whether they will be sued threatened by the S.E.C. if the project is centered in the United States. Coinbase is actually the standard for the crypto space for doing everything by the book and despite this standard they still have encountered this problem. As of now there is really no rule book for the crypto space, which leaves the decentralized system of exchanging assets on the Blockchain in limbo in the United States. If this continues and the managers behind Government regulation will scare off all the talent to other countries placing the United States in a handicapped position in regards to the technology. I can’t see any serious developer wanting to create in an environment where they have to risk creating a project that could put them immediately in the crosshairs of the S.E.C’s or to be sued later down the line as the project becomes more popular. It is understood that there is no clarity and the technology is so fresh that there is a lack of mainstream understanding. But we should not gain this clarity by new precedents being set by taking companies and developers to court. If a full move is made by the S.E.C. against Coinbase, it will scare many people from building out their applications in the U.S.
In conclusion The Government needs to create a crypto exchange committee and have clear rules set a.s.a.p or risk losing talent in the crypto industry. Instead of the S.E.C. behaving as an enforcement agency, they need to get back to regulation. The U.S. is one of the biggest economies for crypto and the technology produced from the Blockchain space is the future. We need to protect talent in this industry in order to maintain leverage and economic power on the world stage.