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April 9, 2018

Coinbase may register with SEC as brokerage firm

by John_A

The Wall Street Journal has reported that Coinbase, one of the world’s largest cryptocurrency exchanges, has reached out to the United States Securities and Exchanges Commission regarding registration as a licensed brokerage firm.

This would expand Coinbase’s roster of cryptocurrencies to include those that the SEC has classified as securities. Additionally, this would likely pressure Coinbase’s rivals to register with the SEC and submit themselves to government oversight.

Coinbase president Asiff Hirji said that the increased regulations would result in Coinbase listing more currencies because it only wishes to list coins which have “some amount of regulatory certainty.”

“The assets that we do list have all had some amount of regulatory certainty,” Hirji told CNBC. “As soon as there is more regulatory clarity than there currently is, you would expect us to start listing more assets.”

The Wall Street Journal reached out to Coinbase for comments regarding its claims, but Coinbase declined to comment on the matter of registering with the SEC.

Bitcoin and similar cryptocurrencies currently face very little in the way of oversight from the U.S. government, but that is slowly starting to change things to the rise of initial coin offerings, which is where startups sell investors tokens in exchange for cash. The rise of ICOs has prompted the SEC to take a closer look at digital currencies, with SEC chairman Jay Clayton saying that most of the tokens offered through ICOs were securities, and thus could only be legally traded on licensed exchanges.

This increased regulatory oversight is what prompted Coinbase to slow down when it comes to listing new currencies. By becoming a  licensed brokerage firm, however, Coinbase is likely hoping to increase the number of currencies it can offer while also staying on the right side of the law.

There are some downsides to registering as a brokerage firm. The SEC has wide-ranging powers to investigate brokerage firms in order to ensure they are complying with various regulations. If Coinbase is registered as a broker, the SEC would have the power to examine its trade records, cybersecurity, and policies, which would prevent market manipulation and insider trading.

That being said, Coinbase is already under the government’s gaze when it comes to tax matters, as the IRS has started cracking down on the trades taking place on Coinbase.

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