Blurred Lines: The SEC and Cryptocurrency Exchange Coinbase Eye Crypto Securities
The Securities and Exchange Commission which oversees the enforcement of securities laws and regulates the industry, recently announced the appointment of its first-ever Crypto Advisor, Valerie A. Szczepanik. The move comes after Division Director William Hinman announced before the US House of Representatives Subcommittee on Capital Markets, Securities, and Investment in April that there are merits to ICOs that allow “for a different type of enterprise, one that’s more decentralized” and that the SEC is interested in making sure regulations don’t stifle cryptocurrency and blockchain innovation.
The SEC continues to position itself as an agency that can work alongside crypto operators, accommodating an emerging class of assets and a new way of raising capital.
Appearing on CNBC on Wednesday, SEC head Jay Clayton clarified that most ICOs look like securities because there is an expectation of a return on investment. “A token, a digital asset, where I give you my money and you go off and make a venture, and in return for giving you my money I say, ‘You can get a return,’ that is a security and we regulate that.”
On Wednesday Coinbase announced strategic acquisitions to help facilitate their path to operate a regulated broker-dealer listing SEC-regulated crypto securities. The popular US digital asset exchange bought Keystone Capital Corp., Venovate Marketplace and Digital Wealth, allowing Coinbase to pick up a broker-dealer license (B-D), an alternative trading system license (ATS) and a registered investment advisor (RIA) license.
In their announcement, Coinbase states “we can envision a world where we may even work with regulators to tokenize existing types of securities, bringing to this space the benefits of cryptocurrency-based markets — like 24/7 trading, real-time settlement, and chain-of-title.”