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The crypto community rallied to support Coinbase after the exchange disclosed receiving a Wells Notice.
A Wells Notice refers to the formal notification that the SEC intends to bring an enforcement action against the recipient.
Founder of Custodia Bank Caitlin Long said, “every exchange” was sent a Wells Notice in early February, but the actions were not publicly disclosed then.
Citing coordinated enforcements against Paxos and Kraken, she stated U.S. authorities are “absolutely” targeting crypto companies.
“Absolutely, there is no question that they are absolutely going after it.”
Coinbase will fight
Coinbase CEO Brian Armstrong posted a tweet thread responding to the matter. He labeled the incident “part of the journey” to positively change the U.S. financial system.
Moreover, given that Armstrong is confident of the exchange’s compliance, he welcomed the chance to demonstrate that in court.
“We are right on the law, confident in the facts, and welcome the opportunity for Coinbase (and by extension the broader crypto community) to get before a court.”
He hopes the legal process will shine a light on the SEC being unfair and unreasonable – also illustrating the agency has not “demonstrated a seriousness of purpose when it comes to its engagement on digital assets.”
Crypto community reacts
David Marcus, the co-founder of Lightspark, said Coinbase chose to play by the rules from its inception while actively engaging with regulators. He blasted its treatment at the hands of the establishment, questioning why the SEC treats shady operations better.
Similarly, Polygon co-founder Sandeep Nailwal echoed Marcus’ points, saying he finds the situation confusing as Coinbase “is the gold standard of compliance.” He signed off by asking, “Whats [sic] going on over there in US?”
Scott Melker, Host of the Wolf of all Streets Podcast, pointed out that Coiinbase has a “war chest and facts on their side.” He confidently declared the SEC would lose in court.
Push to CBDC?
As pointed out above, enforcement action against Coinbase makes little sense at face value. However, Angel Investor @jason explained the situation as a power play to fight back against crypto adoption.
“Ain’t no one in power who would willingly give over their franchise on printing money to… umm… no one!“
VanEck Strategy Advisor Gabor Gurbacs extended this point to say there “is an all out war” against regional banks and crypto. He said this is a “show of force to impel compliance” while pointing out that the U.S. recently posted its revised CBDC paper.
As former BitMEX CEO Arthur Hayes explained, regional banks are under pressure as the recently announced Bank Fund Term Program (BFTP) will not cover the types of assets generally held by these smaller operators.
“The stress is going to be on any bank that has the majority of its loan book in non-U.S. Treasuries and non-mortgage-backed securities because those are not guaranteed.”
Despite Gurbacs pessimism towards regional banks, Hayes predicts the Fed will cave and eventually back every type of asset a bank can hold.