- Coinbase has received a Wells notice from the SEC, sparking frustration and disappointment in the crypto industry.
- David Schwartz, a Ripple executive, has questioned the SEC’s motives in a recent enforcement action.
- The Howey test has become a complex issue in determining whether tokens act as securities.
The crypto industry is no stranger to regulatory scrutiny, with recent developments at Coinbase and Ripple bringing the issue back into the spotlight. The SEC’s issuing a Wells notice to Coinbase, which typically precedes enforcement action, has led to criticism from Ripple CTO David Schwartz and disappointment from some XRP enthusiasts and the broader crypto community.
Schwartz Frustrated with the SEC
In recent tweets, Ripple executive David Schwartz criticized the SEC’s actions towards Coinbase, suggesting their motives may be driven by incompetence or a desire to protect insiders and early investors.
Schwartz questioned the SEC’s true intentions behind their recent enforcement action and expressed frustration with the agency’s application of the Howey test, which he believes is not as simple as some people believe.
The executive pointed out that even top securities lawyers at major law firms struggle to determine how it applies to many tokens, including Ethereum (ETH), the second-largest cryptocurrency.
Schwartz’s comments echoed those made by former blockchain lead at Meta, David Marcus, who noted that the Howey test is complex. Additionally, some members of the XRP community expressed disappointment with the industry’s failure to stand together when Ripple was under fire, which may have weakened the industry.
Coinbase Fights for ‘Reasonable Crypto Rules’
In response to the SEC’s actions, Coinbase stated in a blog post that they had requested “reasonable crypto rules” for Americans but instead received legal threats. The company shared details of its business with the SEC in over 30 meetings during the past nine months, seeking to build a path to registration.
However, according to Brain Armstrong, the CEO of Coinbase, the SEC had given “basically 0 feedback on what to change, or how to register.” The company also noted that the SEC approved their S1 filing when they went public in 2021, knowing the details of their business. Coinbase feels that the SEC has now changed its mind on what is allowed.
On the Flipside
- So far, the SEC’s enforcement actions have not led to clearer regulations for the crypto industry.
- While the crypto community currently views the SEC as an adversary, greater transparency and regulation from the SEC would indeed benefit the industry in the long run.
Why You Should Care
These comments highlight the industry’s frustration with the SEC’s lack of clarity and consistency in applying cryptocurrency regulations. This lack of clarity ultimately affects the entire crypto market, and regulators need to establish reasonable rules and provide guidance to promote innovation and growth in the industry.
For more information on Coinbase’s recent legal trouble with the SEC read here:
Coinbase Draws SEC’s Ire as Major Exchange Faces Lawsuit
For details on how Ripple is using its resources to aid children under cancer care, check out:
Ripple Joins GOSH to Aid Families Affected by Cancer