SEC chairman Gary Gensler suggested that Coinbase could have securities listed on its site. This comment was made in the midst of an ongoing battle between the SEC and Coinbase over cryptocurrency regulation.
The SEC chairman’s remarks on Tuesday have raised the stakes in an ongoing fight between the Securities and Exchange Commission and Coinbase as he claimed that the largest crypto exchange in the U.S. is violating the law. Senator Elizabeth Warren argued that the recent crypto market crash and following exchange failures prove the necessity for SEC regulation of crypto exchanges.
Gensler’s Conversation with Elizabeth Warren about Crypto
On Tuesday morning, Gensler spoke to the Senate Banking Committee on the SEC’s efforts. Cryptocurrency was among the main topics of conversation that Gensler expected. Warren fiercely argued that cryptocurrencies like Bitcoin do not really promote financial inclusiveness. She wondered whether cryptocurrency was better than the banking system.
Warren reminded the SEC about last week’s Bitcoin flash crash. It took just a few hours for $400 billion in market value to be wiped out due to liquidations. Someone who lost all of their money investing on a Monday night might’ve lost all their money without recourse. If an investor needs to withdraw their money, they will discover that exchanges like Coinbase will be down.
Warren and Gensler also agreed that this investor would have no remedy since the lack of federal regulatory regulations for crypto exchanges meant that this person had no way to pursue their claims. They particularly targeted Coinbase, with Gensler denouncing the fact that the organization was not registered as a securities exchange, even though they had hundreds of securities that could fall into that category.
Coinbase’s Unregistered Status?
Speaking before the Senate Banking Committee, Gensler said that Coinbase was not allowed to operate as a stock exchange, since it was not licensed to do so, despite having a large number of possibly securities tokens. Gensler’s statement was striking in that it was made during a response to a question from Sen. Elizabeth Warren about whether consumers would be hurt when a trading volume spike caused exchanges like Coinbase to fail, and it was not in response to a direct question regarding securities
Gensler’s strong remark follows the SEC’s threat to sue Coinbase if it moved through with a digital asset lending program known as Lend. Coinbase CEO Brian Armstrong responded to the SEC’s criticism by saying he was unsure how the loan service constituted a security and accused the SEC of shady conduct. The argument between the SEC Chairman and Armstrong pertains to a crucial issue: how to handle crypto goods that have only been around for a few years.