SEC's New 'Schrödinger' Category
Coinbase in the Crosshairs
In yet another attempt to stifle the forward march of decentralization, the SEC issued a Wells Notice to Coinbase last week, according to a blog post by Chief Legal Officer, Paul Grewal. The letter formally told Coinbase that it will bring up charges against them should they commence with the planned launch of their new Lend programwhich would allow users to lend out their USDC and earn 4% interest as a reward. In a series of tweets, Coinbase founder Brian Armstrong pointed out that other crypto companies have been “offering versions of this for years” and that [Coinbase] reached out to the SEC to “...give them a friendly heads up and briefing”.
The SEC has been throwing a slew of metaphorical darts at the DeFi and Crypto world as of late. They even demanded the name and contact information of every single person on Coinbase’s Lend waitlist — Coinbase refused, questioning what relevance that had to whether or not they were offering securities. The obvious inference that is coming out of it all is that the SEC just doesn’t like what they cannot control and they are trying hard to collect as much data as they can. Perhaps they can then work backwards to find something to pin on these nasty DeFi perps.
Even if the SEC triumphs in shutting down things they consider “illegal securities offerings”, will that make the world a better place? Erik Voorhees says no.
“The question shouldn't be, ‘is the yield product a security?’
The question is, ‘Why can't a reputable company offer a useful service to customers that want it, without getting sued by regulators in the god damned United States of America?’
As it turns out, we may never know whether something is a security or not, because the SEC is refusing to give any guidance, and won’t tell Coinbase which part of their Lend program was the security.
Thus ushering in the new “Schrödinger” category:
"Instruments in this group either are or are not securities depending on whichever happens to be most advantageous to us in regulatory disputes".
We discuss the potential lawsuit on The Hash:
Binance.US Has a New Captain on the Bridge
On Thursday, Binance.US officially announced that former Ant Group executive Brian Shroder has taken the helm of the embattled exchange as the new President. Binance.US stated that Shroder will, “oversee fundraising, business and corporate development, as well as manage the firm's legal and HR matters''.
Binance.US has taken a few hard hits over the past few months from governments all over the world that have accused the exchange of illegally trading securities. There was also the sudden departure of Brian Brooks for them to contend with, who left after just four short months as CEO.
Shroder has made it clear that he intends to enthusiastically carry on with the company’s intention to IPO, saying "I look forward to sharing our exciting story with the broader investment community as we begin our journey towards IPO".
Shroder’s experience navigating the Asian markets may be an asset to the company, as COO of crypto custody firm Qredo, Josh Goodbody, pointed out:
"Despite being an independent company, Binance.US's success is inextricably linked to its relationships with the Binance Group, an organization with its leadership and deep roots in Asia ... knowing how to navigate this business culture, whilst building an increasingly regulated business in the U.S., is a key skill Shroder will need to exercise".
Brian likely won't be heading into this position blindly, as his brother, Matt Shroder, is also a VP at Binance.com, specializing in Global Markets.
Mastercard Acquires MORE Surveillance Tools
Payment Mega-Giant, Mastercard, announced that it has acquired crypto analytics firm, CipherTrace. The company specializes in helping financial institutions track, verify and secure crypto transactions to reduce and halt criminal activity.
“With the rapid growth of the digital asset ecosystem comes the need to ensure it is trusted and safe. Our aim is to build upon the complementary capabilities of Mastercard and CipherTrace to do just this, ” Mastercard President of Cyber & Intelligence Ajay Bhalla said in a statement Thursday.
Specifics and details were not immediately revealed, but Mastercard will be able to track over 900 cryptocurrencies once they fully integrate the system. This is yet another step in Mastercard’s effort to not only join, but become a leader in the system. In February, they said they were planning to let merchants accept crypto by the end of the year, and in July they said they would be utilizing USD coin (USDC) as a bridge between buyers and merchants.
Interesting that now Mastercard will have even more surveillance tools under their belt.
FTX Gets a Slam-Dunk
Acclaimed NBA player, Stephen Curry has joined FTX as a Global Ambassador. The guard for the Golden State Warriors has signed on as a brand representative for the exchange founded by Sam Bankman-Fried. FTX, which defines itself as a “cryptocurrency exchange built by traders, for traders” boasts a multitude of ways to trade and exchange cryptocurrencies by providing access to the derivatives trading markets - meaning that one trades derivative products that reflects the value of the underlying asset; things such as futures, options, leveraged tokens, and prediction markets are just a few examples of what can be utilized on the exchange. This is just the latest in a slew of sports deals that FTX has negotiated to bring attention to themselves. FTX logos can now be seen on uniforms for the MLB and NBA, and even Tom Brady and his wife, Gisele Bündchen, have signed on as FTX Global Ambassadors. Recently, Stephen asked his fellow ambassador for some advice on Twitter.
“Just getting started in the crypto game...y'all got any advice??”
Australian Banks Refuse to Play Nice
In the latest news from the Land Down Under, many Australian banks are being investigated by the Australian Senate Committee for denying, and in some cases, terminating services to businesses that deal in crypto. Crypto exchanges, Aus Merchant and Bitcoin Babe, testified to the Senate Select Committee on Wednesday claiming that they had been repeatedly denied services from the financial institutions they were attempting to do business with. Michaela Juric, founder of Bitcoin Babe stated that in her business’s seven year history, she has had 91 instances where banking services were terminated.
“The reasoning was that we were outside the scope of services for these banks and we weren’t given an opportunity to provide enhanced due diligence procedures,” said Mitchel Travers, managing director for Aud Merchant. “As far as I am aware, it was a risk-avoidance, risk-off attitude”.
Senator Andrew Bragg argued that the issue stems from government, not the banks themselves, tweeting out:
“It’s troubling to hear about the personal impact of de-banking on people trying to set up a small business. The banks have said the driver of de-banking is the lack of a regulatory framework for digital assets. That’s what we must fix and we will hold the banks to that.”
During the hearing, Sen. Bragg also said that banks with whom he spoke would have a greater willingness to participate with crypto businesses if there were more regulation in the crypto markets themselves. When asked how she felt about this, Juric responded, “Sure, that’s a possibility,” but also said that there would be an increased risk for big businesses to shut down small crypto businesses.
Great point, the devil is in the details with regulation.
By Will Sandoval NBTV Associate Producer, and Naomi Brockwell