Coinbase Chief Legal Officer on SEC Crypto Approach: ‘Is This the Best We Can Do?’
by Arthur · March 15, 2023
Coinbase’s chief lawyer Paul Grewal has launched another sharp attack on the US Securities and Exchange Commission.
Talks about Decrypt gm podcast, Grewal said he shares the concern “that we’re losing the script a little bit here in the US when it comes to crypto and crypto regulation.”
In February, the SEC imposed a $30 million fine on Kraken – another popular US crypto exchange – because its betting product allegedly violated securities laws.
Coinbase responded to the news by updating the terms and conditions of its staking service, prompting US-based customers to withdraw several popular cryptocurrencies, including Solana (SUN), Cosmos (ATOM), Cardano (ADA) and Tezos (XTZ).
There are broader concerns that the SEC’s tough stance on digital asset regulation will eventually see US crypto businesses move offshore, with Grewal agreeing that “in other parts of the world, even in other jurisdictions that we consider to be friends and allies, there’s a very different kind of conversation going on.”
“I think you have to ask: is this the best we can do?” Grewal said. “Is it really a smart way to regulate crypto, to put not only exchanges that Coin basebut issuers and project developers across the country, and around the world, to the task of drawing threads from speeches given by one or more commissioners, and looking at media interviews given by one or more commissioners or other SEC officials that suggest that all assets are securities?
“A broken process”, says Coinbase CEO
Grewal said it’s “a pretty broken process,” something “we could all agree on at least that much.” But it doesn’t have to be that way.
Citing last year’s collapse of FTX, which he described as “nothing short of pure fraud”, he admitted that events like this should give regulators enough cause for concern before agreeing on “the right way to ensure that tragedies like f .ex. which never happens again.”
“At the same time, I think it’s also important that we don’t let that unfortunate event shape how we think about the future when countries like France and many others take a very different approach to regulation,” Grewal said.
Last year, the SEC also launched an investigation into Coinbase for allowing US residents to trade unregistered securities, with the crypto exchange filing a formal petition for rulemaking regarding the regulation of digital securities.
The petition included dozens of specific questions and issues that Coinbase believes are necessary to be resolved for the proper rulemaking of the crypto space.
“It’s still not too late, the train hasn’t completely left the station,” Grewal said.
Still, he worries “that the response to the proactive engagement — not just by Coinbase, but by a number of others in crypto — has been to double down or triple down on subpoenas and on enforcement actions.”