(I’m not the expert to hire for this, but https://www.investopedia.com/terms/s/sec-form-8-a.asp looks promising.)
Coinbase doesn't care if it can offer its customers shares of AAPL or TSLA. They care whether they can start brokering the types of securities that are found on public ledgers.
In practice this just means it's de-facto impossible for any centralized exchange to carry crypto securities.
Similarly, they won’t help you figure out how to insider trade, no matter how nicely you ask.
“Please make our illegal business legal, the rules don’t allow it” gets a predictable reception.
If an entire country can't use a piece of accounting software that's gaining worldwide relevance, that's the country's problem.
Companies like Coinbase and a16z have publicly stated their intentions to establish international arms to hedge against the US regulatory environment, and there's no reason my portfolio can't follow their lead.
One less vain primate spewing mountain man gibberish is fine with me. Don’t let the door hit you on the way out.
Fwiw; It would implode “my” nest egg as well, but I actually know how to hunt and grow food and build real things, along with play the civic life game of accumulate ephemeral points (fiat wealth).
Good luck, player! Like you idgaf about obligations to you
So you have to ask yourself... why isn't Coinbase making that argument?
Coinbase has (obviously) always been a strong advocate of distributed ledger technology, is constantly warning of the ramifications of this software being de-facto banned in the US, and has publicly stated that they have contingencies in place for moving offshore if it's economically unviable to be headquartered in and/or serve the US market.
They've been making that argument since 2012.
They should go. Crypto has a niche outside major economies and developed countries with the rule of law.
If you go back to the 1930s, bankers said the same (as they did again in the late 90s). Turns out freewheeling fraud isn’t a determinant for financial centrality. Worst case we can revisit if London or Singapore find a way to make this work, given they’re rapidly approaching being the only major economies who will stomach this nonsense.
Accounting software have tons of local adaptations.
Countries change laws to give their citizens access to important products. It's not about the company.
The USA didn't decide to rewrite existing telephony laws for VOIP in the 90s because they wanted to give Skype a handout, they did it because they understood the potential benefits of internet telephony for the populous.
> Accounting software have tons of local adaptations.
You can't locally adapt a ledger that is globally shared across all the other countries. Either you allow the ledger in your country or you don't.
And Congress was lobbied to do that and they declined. Is your argument that 'they should have done it' means 'the SEC isn't allowed to enforce existing regulations'?
Then you can't be licensed. Simple. "But I really really really want to be licensed" "..."
Coinbase and a16z have already publicly stated that they have plans to set up international arms to hedge against US regulatory risk.
So your statement "then you can't be licensed, simple", comes with the corollary of "the USA's strong fintech industry may move entirely offshore within the next decade." If everyone is cool with that, then yeah, go ahead and blanket ban all US residents from trading any financial instrument that's recorded on a public digital ledger.
Licensed in this discussion obiviously meant the US.
"Coinbase and a16z have already publicly stated that they have plans to set up international arms to hedge against US regulatory risk."
Which is great for them I guess.
"the USA's strong fintech industry"
A tiny, and some might argue irrelevant, part of the US fintech industry is moving offshore.
Crypto to me feels like fusion, it's super relevant, and you just wait some time, you'll see! and then there is another year and another decade and it is still not relevant.
You'd better be very sure of its irrelevancy before sending it all to the UK, where they're embracing it with a clear regulatory framework. If you are right, the US pushes a small ("irrelevant") amount of crime offshore. But in the off chance you are wrong, the USA risks losing their position as the world's financial superpower. This is not a gamble you want to take if there's even a very small chance that this technology could catch on.
> Crypto to me feels like fusion, it's super relevant, and you just wait some time, you'll see! and then there is another year and another decade and it is still not relevant.
It gets discussed multiple times per week on Hacker News. It's talked about constantly in congress. It's beginning to polarize people so much that it creates single issue voters in both directions. The word "NFT" has been etched into the public's consciousness as a meme. Banks and central governments are issuing bonds and other paper on public blockchains. The US is itself planning a version of the US dollar with a design inspired by distributed ledger technology. More than 1 in 5 Americans own cryptocurrency now. I don't know what measure of "relevant" you are using, but it's obviously very different from mine.
I also own crypto somewhere. I don't use it, I don't sell it, I don't care.
Why?
> the USA risks losing their position as the world's financial superpower
Wat.
> US is itself planning a version of the US dollar with a design inspired by distributed ledger technology
This project, thankfully, was dropped by the Fed after preliminary study.
The USA is the world's finance hub because it has the most reliable systems for trading financial assets, and because it has the most reliable currency. But Ethereum network transactions are pretty damn reliable too, even more reliable than wire transfers in some ways (if a bit costly at the moment). Trading on Uniswap is generally more reliable than trading stocks in my brokerage account, and I like how I can bundle multiple trades, borrows and sends together so that they execute atomically, a feature that my brokerage account doesn't support and probably never will. I like that with DeFi, I get to choose my asset-backed loan underwriter separately from my custodian, rather than them both having to be my broker (many of which charge way above market rates for margin loans). Trade settlement happens within seconds, not days. And there has been a cambrian explosion of stablecoin designs, some of them unreliable, some of them quite a bit more reliable than most government currencies.
Is any of it truly better than the current way stocks and currency are traded and held? Maybe, maybe not, but the stakes are much higher than I think most people understand. Distributed ledgers certainly offer some specific advantages that people really sleep on.
> This project, thankfully, was dropped by the Fed after preliminary study.
Nope.
https://www.whitehouse.gov/wp-content/uploads/2022/09/09-202...
https://en.wikipedia.org/wiki/History_of_CBDCs_by_country#Un...
We had the largest consumer market which underwrote a deep financial system. That depth and breadth, together with a rules-based system, is what fuels American financial hegemony. Between political volatility, sanctions and our archaic payment system, we do not hold out reliability as a selling point. (You have to go out to the 1910s to see American financial infrastructure being at the forefront.)
There are definitely lessons to be ported from crypto to our system. But they can come from academia and non-commercial hobbyists or be copied once demonstrated in e.g. London.
> Nope
Yes. You’re citing Q3 ‘22 materials. The programme lost the support it was limping on after Silvergate, SVB and Signatures’ failures. FedNow makes more sense anyway. (We probably wouldn’t have it without crypto.)
Because there is regulation. You seem to get cause and effect mixed up.
The whole point of regulations is to make various business models impossible.
The job of the SEC is to enforce the existing regulations and the job of lawmakers to (maybe) change the regulations if they think it's important to make this type of business possible in the US. In doing so they have to weigh potential benefits and harms caused by doing so.
The guiding priciples behind the SEC's current mandate and the current regulatory enforcement framework in the US Securities Laws are 1)investor protection, 2)fair, efficient and orderly markets and 3)capital formation[1]. In making changes to the securities laws, lawmakers would have to decide whether these changes would compromise these principles and whether the benefit of doing so might outweigh the downsides.
An impartial observer might look at the crypto markets thus far and decide that they are not (in the main) fair, orderly and efficient and that investors have suffered significant losses due to fraud and other malpractise and decide that it wasn't worth the risk to make changes to facilitate these businesses. That said, the crypto industry has spent a very significant amount lobbying lawmakers so they may decide otherwise.
Either way, it's not the job of the SEC (Securities regulator) to decide coinbase gets a free pass to ignore securities regulation in this case because the existing regulations make their business model impossible.
I guess that's the job of congress, then. I think the SEC Stabilization Act is an excellent start. There's nothing unreasonable about wanting to broker securities on a public ledger.
I don't think it's the "public ledger" part of this that causes the regulatory issue frankly.
Myself I think that's precisely the issue the SEC is hung up on, but we could argue endlessly about what is probably causing the regulatory issue with the SEC and what they are probably okay and probably not okay with. Meanwhile, the UK just laid out a clear framework for crypto securities exchange in their new bill, which gives an unambiguous regulatory green light to any companies who want to relocate there.
Yes, same as the others. What doesn’t exist is registration per Coinbase’s model of integrated broker, custodian and exchange. We specifically outlawed that in 1934 because it did precisely what crypto did in almost exactly the same time frame in the period stretching from 1918 (post-WWI) through the 20s’ boom years into 1933.
"Here is how we interpret the Howey test in relation to cryptocurrencies, and here is a ten step process for how we determine whether each particular cryptocurrency is a security" is clarity.
Can you imagine if, back when the SEC first formed in 1934, they put out a press release saying "the vast majority of stocks are securities and need to come register, but not The Bank Of New York, their stock is not a security". Imagine that the SEC didn't elaborate on why they didn't consider that one stock to not be a security, and they didn't elaborate on the reasoning process that led them to that decision.
That's what's happening right now, but with cryptocurrencies.
The 2023 SEC is very different from the 1934 SEC.
This is basically what happened. Mortgage loans and certificates of deposit, for example, aren’t securities by judicial clarification, not definition in the law. (See: Marine Bank v. Weaver)
The Howey test isn’t that complicated, and Coinbase Earn ticked all four boxes.
Still, Earn may well be a security, but that's a product that will fit very cleanly into current securities law when it reaches the court, and it concerns a company's product rather than an entire new asset class, so it's not so egregious that the SEC doesn't provide clarity on it.
The big problem is with their lack of clarity on the cryptocurrencies themselves.
Anyone: "Okay then, is [insert ANY crypto here other than BTC] a security?"
SEC: "We decline to answer, or give a hint, but the vast majority of digital tokens are securities!"
I really don't care what happens, or how it got to this point, but this state of affairs is absolutely and unequivocally ridiculous and absurd.
SEC: “No. Stop playing games. You have to register.”
Coinbase lists less than 300 of the tens of thousands of cryptocurrencies out there - indeed a tiny minority of them, and they do have some kind of legal review process, so while that claim may well be untrue, it's not absurd on its face.
The first step of effective regulation is to state exactly what is out of compliance, which they finally did only a few days ago by listing which particular coins are the ones that put Coinbase out of compliance.
The second step is to explain why those particular coins cause them to be non-compliant and why other coins (Bitcoin) are exempt, in such a way that Coinbase has rules they can apply to determine whether a particular new coin is compliant or not. That clarity is the part we're still waiting for.
Nah, the alternative is why cops get away with everything via qualified immunity. Conmen don’t get given a pat list of what is and isn’t allowed; no one wants to play the “but you saaaaaaid!” game that results.
Yes, they do. Civil courts are full of almost nothing besides "but you said" games. You're just describing the status quo of how law works.
Same with securities. The Howey test exists. The courts and Congress occasionally find a tweak that needs making, but they aren’t likely to be impressed by shenanigans like “oh it isn’t a shared enterprise because of this cute quirky thing”.
https://www.axios.com/2022/06/28/bitcoin-is-the-only-coin-th...
> Elsewhere in the speech, Hinman explained: "If the network on which [a] token or coin is to function is sufficiently decentralized — where purchasers would no longer reasonably expect a person or group to carry out essential managerial or entrepreneurial efforts — the assets may not represent an investment contract."
Eth is fairly uniquely complicated by the fact that it probably went from security to commodity before they could get smacked for the security period.
With only BTC Coinbase would not be an exchange but a wallet.
Like I said, I don't care what happens - but as an outside observer - it's ridiculous.
If you'd like to provide a rebuttal to that, be my guest. But childish swipes that don't address the point being made are just that... childish.
"Please don't post comments that don't contribute anything to the discussion."
as highly relevant to the discussion.
Your comment is not only pointless and petty, it's wrong.
If you don't understand something, the easiest thing is to condemn it and call the person who made the comment stupid.
"It" here would have to be the situation/article, right?
The thing they don't care about is what will happen to Coinbase in the future. They're not reading that.
Even if we assume Coinbase is in the wrong here, a hypothetical exchange with better vetting could also list dozens of coins and be entirely legit with no securities.
The SEC has been super clear for most crypto except Bitcoin and Ether.
Yes. Start with the SEC’s complaint against Coinbase: SOL, ADA, MATIC and ten others [1].
Beyond that, ask a securities lawyer or ask the SEC. Coinbase did. The SEC answered. Coinbase didn’t like the answer, and focussed its messaging on irrelevant statements (or a lack thereof) by Gensler about Bitcoin and Ether. If someone only cash traded those two, they would have a legitimate argument against the SEC’s ambiguity. But practically nobody does: instead they operate unlicensed and illegally-configured securities outfits.
[1] https://www.sec.gov/litigation/complaints/2023/comp-pr2023-1... 114
That attitude started aroind the time Uber got big. Maybe even with AirBnB. In a sense, crypto is exactly the tech eco system we deserve. Good that there is finally some enforcement of rules that apply tp basically everyone else.
Sometimes the court system decides the agency’s rules exceed the authority granted to them by Congress.
Other times Congress uses the Congressional Review Act or new legislation to say “that’s not what we meant”.
The Howey test exists because the SEC enforced said new-ish regulations against someone, and the court agreed with them, holding Howey liable for violations of the '33 Act as implemented by regulators at the SEC.
All this makes the statement "No, Congress creates the rules" upthread inaccurate.
The violations the SEC describes in its complaint (¶ 8) are not nitty gritty. It's all bare-boned Exchange Act malfeasance.
What? The laws Coinbase is being charged with violating are creatures of the Congress and courts, not the administrative state. This is not a case of "the agency that enforces the rules is also charged with creating them" [1].
Again, the point is that both Congress and the SEC make "the rules" around securities. Congress defined securities and gave the SEC the ability to write the rules for securities, with some specific requirements. The SEC's rules can't violate the various Acts of Congress, but they've still got quite a bit of rule-making power delegated to them.
Right. Like choosing what's important and what's not. (It's also a totally dishonest framing by Coinbase. Their business model, a unified broker, exchange and custodian, is fundamentally in violation of the '34 Act. They're asking the SEC to break the law.)
What makes no sense to me is the stupidity of fighting the case. I understand Coinbase's PR rallying the crypto base before. They were making a lobbying push to change the law. And the base would throw money at them. But now? Either management has reason to believe they can run out the clock on the SEC before Congress changes the rules. Or they're as delusional as the base.
We all know that before the crypto bust, a lot of people would've been starting a witch hunt if the SEC had tried to enforce the law. Congress, for starters.
Gensler is being opportunistic now because that's the reality they have to work with.
The wealthy and powerful in this country take it on themselves to personally ruin public servants who get in their way sometimes.
The SEC decides when, what, and for whom it enforces rules?
Would you agree that each library can't have every book ever written, and do you think there is a distinction between not selecting a book and "banning" it?
As if there is a system that catches, charges, prosecutes and/or convicts everyone who breaks the law.
A library can't have every book in the world. This doesn't mean that not selecting a book is exactly the same as "banning" it. It does mean the issue is nuanced.
Oh poor former banker worth $100 million, getting push back when he robs people's right to invest their money how they wang.
The SEC has brought zero enforcement action that turns on Bitcoin or Ether being securities. Somewhat hilariously, these complaints are an industry endemic with bullshitters flipping out about Gensler being able to say “I don’t know.”
"Some of them did securities offerings, but by the time the SEC noticed they were too entrenched and decentralized and it would have been a pain for the SEC to go after them. Ethereum, most notably, very very clearly did an ICO in 2014, raising about $18.3 million by selling ETH tokens. If they did that today, or in late 2017, the SEC would have some serious questions. But by the time the SEC got around to cracking down on ICOs in 2017, Ethereum was big and decentralized and the SEC would have had a hard time, practically and legally, challenging its 2014 ICO. And so everyone sort of grudgingly concedes that ETH is not a security."
No. Coinbase’s complaint is that the SEC has been clear, but that they don’t like the clear answer.
https://assets.ctfassets.net/c5bd0wqjc7v0/5NRidtW8lvwVEfSHpn...
> Rather than initiate new rulemaking, Chair Gensler has repeatedly stated through speeches and testimony that the vast majority of digital tokens are securities, and has asked issuers and exchanges that offer, sell, and trade them to come in and register. We disagree that the majority of digital assets are securities. For those digital assets that are securities, registration under the current rules is, for many market participants, either not possible or not economically viable given the associated and unnecessary compliance burdens.