Coinbase CEO Brian Armstrong responded to US Securities & Exchange Commission (SEC) Chair Gary Gensler’s lawsuit against the crypto exchange, referring to him as an “exception” and reassuring customers about the safety of their funds. According to the SEC, Coinbase allegedly traded 13 crypto assets that should have been registered as securities, including Solana, Cardano, and Polygon. Additionally, the agency claimed that Coinbase operated as an unregistered exchange, broker, and clearinghouse.
Armstrong, who has been critical of the SEC and has advocated for clearer crypto regulations, stated at a Bloomberg conference that Coinbase had approached the regulator about registration but received a cold response from Gensler during their initial meeting, reported Reuters.
Gensler has consistently argued that most tokens are securities and has been asserting the SEC’s authority over the crypto market. The US President’s Working Group on Financial Markets has also indicated that certain coins linked to fiat currencies could be considered securities.
Crypto companies, including Coinbase, dispute the classification of crypto tokens as securities and have repeatedly called for clear regulatory guidelines from the SEC.
Armstrong referred to Gensler as an outlier, mentioning that several lawmakers he spoke with supported the development of a transparent regulatory framework for the technology.
Following the news, Coinbase shares rebounded, rising approximately 3.1 per cent to $53.2.
The SEC declined to comment through a spokesperson.
In a separate lawsuit, the SEC sued Binance, the largest cryptocurrency exchange globally, accusing it of selling unregistered cryptocurrency products, inflating trading volumes, and failing to restrict US customers from its platform.
Armstrong swiftly highlighted the differences between the two cases, emphasising that Coinbase has not been accused of misappropriating customer funds.
Paul Grewal, Coinbase’s chief legal officer, expressed confidence that the SEC would not attempt to freeze the company’s assets, as it did with Binance. He explained that the standards required for asset seizure did not apply to Coinbase.
Binance did not immediately respond to a request for comment. In response to the lawsuit, Binance pledged to vigorously defend itself, criticising the SEC for its lack of clarity in the crypto industry.
This is not the first time Armstrong has criticised the SEC. In 2021, he accused the agency of engaging in “sketchy behaviour” after it threatened to sue Coinbase over a planned lending program. Coinbase subsequently dropped the product.
Coinbase had previously disclosed an SEC investigation into its asset listing processes, staking programs, and yield-generating products. In the first quarter of this year, Coinbase had discussions with the SEC about a potential settlement involving a penalty payment and a path to registration. However, the talks broke down when the SEC stated that fundamental aspects of Coinbase’s business model were essentially illegal.
Coinbase has been urging the SEC to establish specific crypto regulations since last year and sought a response from the regulator through legal channels in April. On Tuesday, the US Court of Appeals for the Third Circuit ordered the SEC to provide a response within a week.
Grewal expressed Coinbase’s willingness to engage in a dialogue with the SEC to bring cryptocurrency within the regulatory framework while also emphasising the company’s commitment to defending itself in court.
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