Coinbase is on the brink of a legal war with the Securities and Exchange Commission (SEC) to achieve long-awaited clarity on how federal securities laws apply to the crypto industry, according to chief executive officer Brian Armstrong.
If the regulator’s situation does not improve, the executive said the exchange would consider moving out of the United States.
Will Coinbase move overseas?
In an interview with CNBC on Tuesday, Armstrong called out “certain regulators” for taking a “regulation-by-enforcement approach” to cryptocurrencies in the US, a term he previously used to describe the industry’s treatment by of the SEC. Given this aggressive approach, he admitted that Coinbase was already looking at other countries to potentially establish a new headquarters.
“The UK is really very good for us,” said the CEO. The region, he noted, is Coinbase’s second-highest earning country, and its leaders have expressed promising interest in turning the nation into a Web3 hub.
Coinbase in particular is under fire from the SEC, which issued to the company a notice from Wells earlier this month, which is a warning notice of intent to sue the company. He claimed that Coinbase had violated federal securities laws, which Armstrong suspects are related to the assets listed on the exchange, as well as his gambling as a service product.
The CEO said the SEC had never notified the exchange about what it might be doing better to comply with the rules in more than 30 meetings over the past year.
“I think we’re going to have to end up going to court to get the clarity we need and create the jurisprudence,” he said, referring to judicial precedent.
A multi-year legal battle
One of the SEC’s most high-profile crypto industry ongoing lawsuits began with Ripple in December 2020, when the agency alleged that the company’s XRP token was an unregistered security. Armstrong said Coinbase is prepared for its own lawsuit with the agency to escalate into a similar multi-year debacle if that’s what it takes to gain legal clarity.
“We never seek litigation but it seems that, in this case, they have started it,” he added. “The law is on our side.”
On a separate front, the SEC is fighting Grayscale, the world’s largest Bitcoin fund, which sued the agency last June for “arbitrarily” refusing to approve the company’s request to launch a Bitcoin Spot ETF.
during the first oral hearing for the case in early March, the court judges were skeptical of the SEC’s arguments that there was a significant difference between the requirements to approve Bitcoin Futures ETFs and spot ETFs. The event sent GBTC pumping 16% on the day.
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