- Coinbase, a $US1.6 billion cryptocurrency exchange, has approached regulators about registering as a licensed brokerage, according to The Wall Street Journal.
- Registering with the Securities and Exchange Commission (SEC) would allow Coinbase to exchange those cryptocurrencies that the feds determine to be securities.
- Though the cryptocurrency space has historically been anti-regulation, the SEC is clamping down.
Coinbase, the $US1.6 billion cryptocurrency exchange, has approached the United States Securities and Exchange Commission (SEC) about registering as a licensed brokerage firm and electronic-trading venue, sources told The Wall Street Journal.
Registering with the SEC would let Coinbase expand the cryptocurrencies traded on its platform to include those coins that the SEC identifies as securities – while putting pressure on its competitors to follow suit, according to The Journal.
Coinbase declined to comment for this story.
The SEC hasn’t decided yet which digital tokens are considered securities. Until it comes out with more specific guidelines, the commission has recommended that would-be investors follow the Howey Test, created by the Supreme Court in 1946 to determine whether an unconventional financial vehicle requires the same regulation as familiar investments like stocks and bonds.
It’s widely believed by people in the space that most cryptocurrencies will be regulated as securities, though many coin creators work hard to establish that their coins are not treated as such. That kind of regulation could mean a lot of red tape for buyers and sellers alike, potentially dampening demand.
For its part, the world of cryptocurrency has been sceptical, if not outright hostile, toward financial regulators. But Coinbase wants to be the Google of cryptocurrencies, and has its eye on expanding its exchange beyond the four coins currently listed – bitcoin, ethereum, litcoin and bitcoin cash.
Though not the largest exchange in the world, Coinbase is regarded as the platform that made bitcoin accessible to the non-techncial masses. The company’s policy is to only list coins that it’s deemed stable enough over the longterm to trade, as compared with the many volatile tokens out there that routinely experience intense price swings.
Coinbase recently announced that it will add support for a popular type of coin known as ethereum tokens, potentially expanding the number of tokens it can let users trade. However, Coinbase also made clear that it will put off adding any new coins to its exchange until there is more clarity around how the SEC will regulate the space.
Despite its willingness to play ball, however, Coinbase hasn’t always had the best relationship with federal authorities.
The company fought the Internal Revenue Service in court last year over its request for information on Coinbase customers who made money trading on the platform. Ultimately, Coinbase was ordered to provide information on around 14,000 customers who made transactions over $US20,000 between 2013 and 2015.
Meanwhile, the SEC has been clamping down on blockchain projects and initial coin offerings (ICOs), which have had free reign to do as they please while regulators have struggled to catch up with the technology. On Monday, in one of its most extreme actions to date, the SEC charged two of the founders behind Centra Tech with fraud related to its $US32 million ICO.
It’s also common practice for blockchain projects to create “tokens” for use within their platforms. Oftentimes, these companies will host ICOs in which they fundraise by selling off tokens to investors. The SEC is looking hard at such tokens in order to decide which ones ought to be regulated.
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