Coinbase Fires at SEC Again, Defending Stablecoins

For the second time within a week, Coinbase stood out and criticized the US Securities and Exchange Commission's (SEC) regulation decisions. The exchange published an article on Twitter to explain why stablecoins are not securities.

The SEC has issued a Wells notice to Paxos, and the New York Department of Financial Services (NYDFS) has ordered the company to stop issuing $BUSD. The action triggered lots of discussions and criticisms from the crypto community, including Coinbase.

"We don't know what aspects of $BUSD might be of interest to the SEC." the exchange said, "what we do know: stablecoins are not securities."

It then explained what stablecoins are and why they are important. "US Dollar-backed (or cash equivalent) stablecoins are digital currencies pegged to a reserve asset like the US Dollar and are designed to remain equal to the value of their peg. "

"The value of fiat-pegged stablecoins stays stable over time, and their digital properties make them faster, more efficient, and more accessible ways to conduct commerce. Their stable value over time is also why they're not used as investments."

Stablecoins are beneficial for both customers and businesses. For the former, stablecoins "transcend banking hours and global borders", allowing customers to send and receive at any time, and to hold value pegged to USD without having to have a US bank account. For the latter, stablecoins "make settling payments instant and cost-effective".

Coinbase believed that "the US will benefit enormously if USD continues to be the most trusted and used global reserve currency for fiat-backed stablecoins". However, the SEC's regulation method, which is "imposing securities law onto stablecoins through enforcement instead of guidance or dialogue with the industry", will "simply push innovation offshore".

"Getting this right means real dialogue between regulators and the industry followed by clear rules for the industry and lanes for the various regulators themselves." Coinbase added, "this is how we ensure the promise of greater financial accessibility, efficiency, and innovation that safe technology like stablecoins can provide in the US. Not through threats of litigation without explanation or a basis in existing law."

Coinbase has been active in discussing regulation recently. Last week, following Kraken's settlement with the SEC, Coinbase Chief Legal Officer Paul Grewal published a blog article to declare that the exchange's staking services were not securities. He said, "trying to superimpose securities law onto a process like staking doesn't help consumers at all and instead imposes unnecessarily aggressive mandates that will prevent US consumers from accessing basic crypto services and push users to offshore, unregulated platforms."