Coinbase: We Didn’t Need SEC Approval to Acquire Broker-Dealer Firms

Coinbase on Tuesday rejected a report by Bloomberg that claimed the United States SEC had given the exchange the go-ahead to finalize the acquisition of three companies: Keystone Capital Corp., Venovate Marketplace Inc., and Digital Wealth LLC.

In an email to Bloomberg, the American digital currency Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term’s Vice President of Communications, Rachael Horwitz wrote that that not only did the SEC not give this endorsement but also that Coinbase never needed the endorsement in the first place.

“It is not correct to say that the SEC and FINRA approved Coinbase’s purchase of Keystone because SEC was not involved in the approval process,” Horwitz wrote.

The acquisitions are part of the Coinbase's plans to become a broker-dealer and to sell coins that have been classified as securities.

Where Did the Confusion Come From?

Horwitz added that the confusion arose because “Coinbase has discussed aspects of its proposed operations, including the acquisition of the Keystone Entity, on an informal basis with several members of SEC staff.”

“The SEC’s approval is not required for the change of control application,” she explained.

At the time, Coinbase spokesman Elliott Suthers said in an emailed statement to Bloomberg that "being approved to take ownership of these licensed entities is one more step toward our ultimate goal of allowing our customers to trade securities tokens on our platform. There are many more steps and conversations needed with regulators before this journey’s complete.”

Plans for the Acquisition Were Announced Last Month

Coinbase originally announced plans to make the acquisitions in early June, an announcement that was nearly simultaneous with a statement from cryptocurrency platform Circle Internet Financial Ltd. that they would also be pursuing registration as a broker-dealer and a federal banking license to provide a wider variety of services to customers.

At the time, Bloomberg reported that “If U.S. regulators approve, Coinbase will use licenses its obtains to offer customers Blockchain Blockchain Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tampe Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tampe Read this Term-based securities.”

Regardless of whether or not the SEC’s permission was needed to acquire the three firms, their acquisition does place Coinbase under the legal jurisdiction of the SEC and Finra. In the past, Coinbase was regulated by various authorities on a state-by-state basis.

“This is not only a good thing for our company but a good thing for our industry,” said Adam White, general manager of Coinbase’s institutional branch. “We’re going to move at pace at which regulators are comfortable.”