Coinbase, the U.S’s largest cryptocurrency exchange, is preparing to pitch a regulatory framework to federal officials as to how crypto should be regulated. It is thought that this proposal will be rolled out in the coming days- details of the proposal were not available at press time. In the proposal, Coinbase intends to argue what should and should not be defined as a security within the U.S.
A security is a tradable financial asset that has monetary value.
The news of Coinbase’s proposal comes shortly after the exchange announced intentions to halt their plans to offer a crypto lending product, which the Securities and Exchange Commission (SEC) said would violate securities laws.
At the beginning of this month, Coinbase Chief Legal Officer, Paul Grewal, and CEO, Brian Armstrong, revealed that SEC had sent a Wells notice to the exchange, This notice said that SEC would sue Coinbase if it were to launch its lend product.
Also read: Coinbase drops its lending program following SEC threats
The SEC referred to two U.S Supreme Court precedents- the Howey and Reves cases- to argue that Lend appeared to violate securities laws. Securities Laws are a group of rules and regulations that govern the issuance of securities, the laws must be adhered to under the Securities Act (1933), Securities Exchange Act (1934) and the National Securities Markets Improvement Act (1996).
Coinbase did not publish the Wells notice that was given; however, some experts believe that the regulator might be comparing Lend to stocks or certificates of interest, which are securities under SEC’s guidelines.
This would not be the first time that Coinbase has created a framework to standardise how exchanges approach crypto listings and products within the U.S. The exchange was a founding member of the Crypto Rating Council, which was set up in 2019 to create a shared understanding of how closely any given cryptocurrency resembled a security.
The Crypto Rating Council rated each cryptocurrency from 1 to 5. A score of 1 referred to a currency that is definitely not a security and 5 indicated that a cryptocurrency did appear to be a security. The CRC has not announced any cryptocurrencies that have been given a rating of 5.
The CRC published its initiative along with a scorecard that could be used by future projects for self-evaluation. Coinbase also published an open-source technical framework for crypto developers last year. The idea was that projects that adopted the framework could ensure their cryptocurrencies would be compatible with Coinbase’s listing and trading technical department. This would only be the case if the exchange approved the cryptocurrencies for its platform.
Contributors
