The US-listed cryptocurrency exchange Coinbase made the headlines this week after the US Securities and Exchange Commission (SEC) announced it would sue them over concerns of breaching security laws if the firm launches its Lend program. The news not only took the crypto community by surprise but Coinbase itself.
“As surprised as we were at the SEC’s threat to sue without ever telling us why, we want to be transparent with you about the course of events leading up to it,” Paul Grewal, Coinbase’s Chief Legal Officer, commented on a blog post right after the announcement hit the wires. There are more questions than answers after the watchdog announced the plans, and most of them are concerning the crypto sphere.
Biden Administration and Cryptos
The US President Joe Biden’s administration is willing to regulate the industry further, which has been on some sort of a grey area from a regulatory perspective. For example, the Internal Revenue Service (IRS) classifies virtual currency as property. On the other hand, the Commodity Futures Trading Commission (CFTC) considers them as commodities. The SEC has said that they ‘may be securities, depending on the facts and circumstances’.
The Lend program seeks to allow users to earn interest in their crypto holdings. Although it has not been launched to the public, the product is set to offer a 4% yield once their holders lend their Stablecoin
Stablecoin
Unlike other cryptocurrencies like Bitcoin and Ethereum, stablecoins are cryptocurrencies that have been designed to keep a stable value. Placing a greater emphasis on stability over volatility can be a huge draw for some investors. Many individuals can be turned off from large swings and uncertainty presented by cryptos relative to other traditional assets.Stablecoins control for this volatility by being pegged to another cryptocurrency, fiat money, or to exchange-traded commodities, including gold, silver, or others. Advantages of StablecoinsOf note, stablecoins redeemable in currency, commodities, or fiat money are also said to be backed, whereas those tied to an algorithm are not considered to be so.There are several advantages of asset backed crypto. First, these coins are stabilized by assets that fluctuate outside of the crypto space, that is. This can help mitigate the financial risk associated with these assets.For example, Bitcoin and altcoins are highly correlated, so that cryptocurrency holders cannot escape periodic price falls. Stablecoins control for this vulnerability, allowing for the diversification of risk in a portfolio.Stablecoins also possess a mechanism for redeeming the asset backing them. This grants an additional level of confidence associated with the coin and are unlikely to drop below the value of the underlying physical asset, due to the effects such as arbitrage.For example, fiat-pegged coins are coins that are tied to a specified amount of fiat currency, usually on a one-to-one ratio (i.e.1 StablecoinX = $1). The companies that issue these currencies must have fiat reserves in the equivalent amount of the stablecoins they have issued.Crypto-pegged stablecoins constitute coins that are tied to a specified amount of another cryptocurrency, such as Bitcoin or Ethereum. Algorithmic stablecoins use supply-and-demand to automatically maintain a stable value.
Unlike other cryptocurrencies like Bitcoin and Ethereum, stablecoins are cryptocurrencies that have been designed to keep a stable value. Placing a greater emphasis on stability over volatility can be a huge draw for some investors. Many individuals can be turned off from large swings and uncertainty presented by cryptos relative to other traditional assets.Stablecoins control for this volatility by being pegged to another cryptocurrency, fiat money, or to exchange-traded commodities, including gold, silver, or others. Advantages of StablecoinsOf note, stablecoins redeemable in currency, commodities, or fiat money are also said to be backed, whereas those tied to an algorithm are not considered to be so.There are several advantages of asset backed crypto. First, these coins are stabilized by assets that fluctuate outside of the crypto space, that is. This can help mitigate the financial risk associated with these assets.For example, Bitcoin and altcoins are highly correlated, so that cryptocurrency holders cannot escape periodic price falls. Stablecoins control for this vulnerability, allowing for the diversification of risk in a portfolio.Stablecoins also possess a mechanism for redeeming the asset backing them. This grants an additional level of confidence associated with the coin and are unlikely to drop below the value of the underlying physical asset, due to the effects such as arbitrage.For example, fiat-pegged coins are coins that are tied to a specified amount of fiat currency, usually on a one-to-one ratio (i.e.1 StablecoinX = $1). The companies that issue these currencies must have fiat reserves in the equivalent amount of the stablecoins they have issued.Crypto-pegged stablecoins constitute coins that are tied to a specified amount of another cryptocurrency, such as Bitcoin or Ethereum. Algorithmic stablecoins use supply-and-demand to automatically maintain a stable value.
Read this Term USD Coin (USDC) to Coinbase. Due to the SEC’s turmoil, its launch has been delayed until October.
But, the now-set Coinbase vs. SEC battle could escalate further, and it is something that its CEO, Brian Armstrong, has hinted in some tweets. In fact, he revealed that the SEC did not want to meet with him when he travelled to Washington DC in May this year. Of course, that happened within the context of Coinbase becoming the first publicly traded crypto exchange.
Is It All about Clarifying Legal Concepts?
However, is Coinbase willing to go to court with the SEC? Armstrong said the following in that regard: “If we end up in court, we may finally get the regulatory clarity the SEC refuses to provide. But, Regulation
Regulation
Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority (FCA), the US’ Securities and Exchange Commission (SEC), Australian Security and Investment Commission (ASIC), and the Cyprus Securities and Exchange Commission (CySEC) are the most widely dealt with authorities in the FX industry.In its most basic sense, regulators help ensure the filing of reports and transmission of data to help police and monitor activity by brokers. Regulators also serve as a countermeasure against market abuse and malpractice by brokers. Brokers adhering to a list of mandated rules are authorized to provide investment activities in a given jurisdiction. By extension, many unauthorized or unregulated entities will also seek to market their services illegally or function as a clone of a regulated operation.Regulators are essential in snuffing out these scam operations as they prevent significant risks for investors.In terms of reporting, brokers are also required to regularly file reports about their clients’ positions to the relevant regulatory authorities. The most-recent regulatory push in the aftermath of the Great Financial Crisis of 2008 has delivered a material shift in the regulatory reporting landscape.Brokers typically outsource the reporting to other companies which are connecting the trade repositories used by regulators to the broker’s systems and are handling this crucial element of compliance.Beyond FX, regulators help reconcile all matters of oversight and are watchdogs for each industry. With ever-changing information and protocols, regulators are always working to promote fairer and more transparent business practices from brokers or exchanges.
Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority (FCA), the US’ Securities and Exchange Commission (SEC), Australian Security and Investment Commission (ASIC), and the Cyprus Securities and Exchange Commission (CySEC) are the most widely dealt with authorities in the FX industry.In its most basic sense, regulators help ensure the filing of reports and transmission of data to help police and monitor activity by brokers. Regulators also serve as a countermeasure against market abuse and malpractice by brokers. Brokers adhering to a list of mandated rules are authorized to provide investment activities in a given jurisdiction. By extension, many unauthorized or unregulated entities will also seek to market their services illegally or function as a clone of a regulated operation.Regulators are essential in snuffing out these scam operations as they prevent significant risks for investors.In terms of reporting, brokers are also required to regularly file reports about their clients’ positions to the relevant regulatory authorities. The most-recent regulatory push in the aftermath of the Great Financial Crisis of 2008 has delivered a material shift in the regulatory reporting landscape.Brokers typically outsource the reporting to other companies which are connecting the trade repositories used by regulators to the broker’s systems and are handling this crucial element of compliance.Beyond FX, regulators help reconcile all matters of oversight and are watchdogs for each industry. With ever-changing information and protocols, regulators are always working to promote fairer and more transparent business practices from brokers or exchanges.
Read this Term by litigation should be the last resort for the SEC, not the first.”
Legal experts have reacted to the news, such as Charles Whitehead, Professor at Cornell Law School, who told the Financial Times that there are still questions that SEC needs to answer first regarding loan accounts: “At its core, this is a question of SEC jurisdiction. The question is whether these loan accounts are securities. And if they aren’t securities, what are they, and who regulates them?”
In fact, he highlighted the question of whether an instrument like a lend could be a note or a security when it comes to the broad offering of crypto instruments that are appearing on the scene.
On the other hand, Tyler Gellasch, a former SEC official who now leads the Healthy Markets Association, commented to The New York Times that the watchdog has now recognized the importance of handling a new product when it makes its inception into a market, even if it is the crypto market: “This is a very large player in the cryptocurrency place, and they are extremely cautious in bringing down a hammer.”
As of press time, there are no additional updates on whether the Lend program will be postponed again by Coinbase or not.
The US-listed cryptocurrency exchange Coinbase made the headlines this week after the US Securities and Exchange Commission (SEC) announced it would sue them over concerns of breaching security laws if the firm launches its Lend program. The news not only took the crypto community by surprise but Coinbase itself.
“As surprised as we were at the SEC’s threat to sue without ever telling us why, we want to be transparent with you about the course of events leading up to it,” Paul Grewal, Coinbase’s Chief Legal Officer, commented on a blog post right after the announcement hit the wires. There are more questions than answers after the watchdog announced the plans, and most of them are concerning the crypto sphere.
Biden Administration and Cryptos
The US President Joe Biden’s administration is willing to regulate the industry further, which has been on some sort of a grey area from a regulatory perspective. For example, the Internal Revenue Service (IRS) classifies virtual currency as property. On the other hand, the Commodity Futures Trading Commission (CFTC) considers them as commodities. The SEC has said that they ‘may be securities, depending on the facts and circumstances’.
The Lend program seeks to allow users to earn interest in their crypto holdings. Although it has not been launched to the public, the product is set to offer a 4% yield once their holders lend their Stablecoin
Stablecoin
Unlike other cryptocurrencies like Bitcoin and Ethereum, stablecoins are cryptocurrencies that have been designed to keep a stable value. Placing a greater emphasis on stability over volatility can be a huge draw for some investors. Many individuals can be turned off from large swings and uncertainty presented by cryptos relative to other traditional assets.Stablecoins control for this volatility by being pegged to another cryptocurrency, fiat money, or to exchange-traded commodities, including gold, silver, or others. Advantages of StablecoinsOf note, stablecoins redeemable in currency, commodities, or fiat money are also said to be backed, whereas those tied to an algorithm are not considered to be so.There are several advantages of asset backed crypto. First, these coins are stabilized by assets that fluctuate outside of the crypto space, that is. This can help mitigate the financial risk associated with these assets.For example, Bitcoin and altcoins are highly correlated, so that cryptocurrency holders cannot escape periodic price falls. Stablecoins control for this vulnerability, allowing for the diversification of risk in a portfolio.Stablecoins also possess a mechanism for redeeming the asset backing them. This grants an additional level of confidence associated with the coin and are unlikely to drop below the value of the underlying physical asset, due to the effects such as arbitrage.For example, fiat-pegged coins are coins that are tied to a specified amount of fiat currency, usually on a one-to-one ratio (i.e.1 StablecoinX = $1). The companies that issue these currencies must have fiat reserves in the equivalent amount of the stablecoins they have issued.Crypto-pegged stablecoins constitute coins that are tied to a specified amount of another cryptocurrency, such as Bitcoin or Ethereum. Algorithmic stablecoins use supply-and-demand to automatically maintain a stable value.
Unlike other cryptocurrencies like Bitcoin and Ethereum, stablecoins are cryptocurrencies that have been designed to keep a stable value. Placing a greater emphasis on stability over volatility can be a huge draw for some investors. Many individuals can be turned off from large swings and uncertainty presented by cryptos relative to other traditional assets.Stablecoins control for this volatility by being pegged to another cryptocurrency, fiat money, or to exchange-traded commodities, including gold, silver, or others. Advantages of StablecoinsOf note, stablecoins redeemable in currency, commodities, or fiat money are also said to be backed, whereas those tied to an algorithm are not considered to be so.There are several advantages of asset backed crypto. First, these coins are stabilized by assets that fluctuate outside of the crypto space, that is. This can help mitigate the financial risk associated with these assets.For example, Bitcoin and altcoins are highly correlated, so that cryptocurrency holders cannot escape periodic price falls. Stablecoins control for this vulnerability, allowing for the diversification of risk in a portfolio.Stablecoins also possess a mechanism for redeeming the asset backing them. This grants an additional level of confidence associated with the coin and are unlikely to drop below the value of the underlying physical asset, due to the effects such as arbitrage.For example, fiat-pegged coins are coins that are tied to a specified amount of fiat currency, usually on a one-to-one ratio (i.e.1 StablecoinX = $1). The companies that issue these currencies must have fiat reserves in the equivalent amount of the stablecoins they have issued.Crypto-pegged stablecoins constitute coins that are tied to a specified amount of another cryptocurrency, such as Bitcoin or Ethereum. Algorithmic stablecoins use supply-and-demand to automatically maintain a stable value.
Read this Term USD Coin (USDC) to Coinbase. Due to the SEC’s turmoil, its launch has been delayed until October.
But, the now-set Coinbase vs. SEC battle could escalate further, and it is something that its CEO, Brian Armstrong, has hinted in some tweets. In fact, he revealed that the SEC did not want to meet with him when he travelled to Washington DC in May this year. Of course, that happened within the context of Coinbase becoming the first publicly traded crypto exchange.
Is It All about Clarifying Legal Concepts?
However, is Coinbase willing to go to court with the SEC? Armstrong said the following in that regard: “If we end up in court, we may finally get the regulatory clarity the SEC refuses to provide. But, Regulation
Regulation
Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority (FCA), the US’ Securities and Exchange Commission (SEC), Australian Security and Investment Commission (ASIC), and the Cyprus Securities and Exchange Commission (CySEC) are the most widely dealt with authorities in the FX industry.In its most basic sense, regulators help ensure the filing of reports and transmission of data to help police and monitor activity by brokers. Regulators also serve as a countermeasure against market abuse and malpractice by brokers. Brokers adhering to a list of mandated rules are authorized to provide investment activities in a given jurisdiction. By extension, many unauthorized or unregulated entities will also seek to market their services illegally or function as a clone of a regulated operation.Regulators are essential in snuffing out these scam operations as they prevent significant risks for investors.In terms of reporting, brokers are also required to regularly file reports about their clients’ positions to the relevant regulatory authorities. The most-recent regulatory push in the aftermath of the Great Financial Crisis of 2008 has delivered a material shift in the regulatory reporting landscape.Brokers typically outsource the reporting to other companies which are connecting the trade repositories used by regulators to the broker’s systems and are handling this crucial element of compliance.Beyond FX, regulators help reconcile all matters of oversight and are watchdogs for each industry. With ever-changing information and protocols, regulators are always working to promote fairer and more transparent business practices from brokers or exchanges.
Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority (FCA), the US’ Securities and Exchange Commission (SEC), Australian Security and Investment Commission (ASIC), and the Cyprus Securities and Exchange Commission (CySEC) are the most widely dealt with authorities in the FX industry.In its most basic sense, regulators help ensure the filing of reports and transmission of data to help police and monitor activity by brokers. Regulators also serve as a countermeasure against market abuse and malpractice by brokers. Brokers adhering to a list of mandated rules are authorized to provide investment activities in a given jurisdiction. By extension, many unauthorized or unregulated entities will also seek to market their services illegally or function as a clone of a regulated operation.Regulators are essential in snuffing out these scam operations as they prevent significant risks for investors.In terms of reporting, brokers are also required to regularly file reports about their clients’ positions to the relevant regulatory authorities. The most-recent regulatory push in the aftermath of the Great Financial Crisis of 2008 has delivered a material shift in the regulatory reporting landscape.Brokers typically outsource the reporting to other companies which are connecting the trade repositories used by regulators to the broker’s systems and are handling this crucial element of compliance.Beyond FX, regulators help reconcile all matters of oversight and are watchdogs for each industry. With ever-changing information and protocols, regulators are always working to promote fairer and more transparent business practices from brokers or exchanges.
Read this Term by litigation should be the last resort for the SEC, not the first.”
Legal experts have reacted to the news, such as Charles Whitehead, Professor at Cornell Law School, who told the Financial Times that there are still questions that SEC needs to answer first regarding loan accounts: “At its core, this is a question of SEC jurisdiction. The question is whether these loan accounts are securities. And if they aren’t securities, what are they, and who regulates them?”
In fact, he highlighted the question of whether an instrument like a lend could be a note or a security when it comes to the broad offering of crypto instruments that are appearing on the scene.
On the other hand, Tyler Gellasch, a former SEC official who now leads the Healthy Markets Association, commented to The New York Times that the watchdog has now recognized the importance of handling a new product when it makes its inception into a market, even if it is the crypto market: “This is a very large player in the cryptocurrency place, and they are extremely cautious in bringing down a hammer.”
As of press time, there are no additional updates on whether the Lend program will be postponed again by Coinbase or not.