Coinbase CEO said the team is prepared to defend itself in court if it comes to it.
It appears the Securities and Exchange Commission (SEC) cannot tear the relationship between crypto company Coinbase (NASDAQ: COIN) and financial services company JPMorgan (NYSE: JPM) asunder. While many would believe that the rising regulatory scrutiny from the Commission would affect the bond between Coinbase and JPMorgan, the companies’ alliance remains unfazed. Familiar sources also confirmed the continued agreement between the two despite the ongoing conflict.
Coinbase Continues to Bank with JPMorgan amid Regulatory Scrutiny
The crypto industry has become a major focus for the SEC, which has been cracking down on many crypto companies. Earlier this month, Coinbase CEO Brian Armstrong took to Twitter to share rumors of a possible ban on crypto staking. The CEO wrote that the Commission may be banning crypto staking for retail customers. Shortly after Armstrong’s tweets, the SEC announced that Kraken would shut down its US staking operation in addition to a $30 million settlement. The regulator claimed that Kraken did not register the offer or sale of its crypto asset staking program. In reaction to the news about Kraken and the SEC, Coin base’s shares dropped 14%. Notably, Coinbase has a staking service dubbed Earn which offers a 6% rate. According to SEC Chair Gary Gensler, crypto-staking companies must “provide the proper disclosures and safeguards required by securities laws.”
Meanwhile, Coinbase is ready to tackle the SEC on its staking services. The company’s CEO said the team is prepared to defend itself in court if it comes to it. The exchange’s chief legal officer Paul Grewal published a blog post to explain how staking cannot be classified as a security. He concluded by referring to the US Securities Act and the Howey Test.
“The purpose of securities law is to correct for imbalances in information. But there is no imbalance of information in staking, as all participants are connected on the blockchain and are able to validate transactions through a community of users with equal access to the same information.”
As Coinbase enters the defensive mode with SEC, the people familiar with the matter said the exchange would continue to bank with JPMorgan. In addition, Grewal wrote that “unnecessarily aggressive mandates” from the agency will affect US consumers. He said such actions may prevent customers from accessing crypto services in the US, hence pushing them to offshore, unregulated platforms.
NYDFS Stops Paxos from Issuing BUSD
While crypto enthusiasts are hoping for a reduced crackdown on the industry, the New York Department of Financial Services recently ordered Paxos Trust to stop issuing the BUSD. This came after the agency started an investigation into the financial institution last week. Paxos will seize the further issuance of BUSD stablecoins beginning from the 21st of February. It also plans to further honor BUSD redemptions till February 2024.
“New and existing Paxos customers will be able to redeem their funds in US dollars to convert their BUSD tokens to Pax Dollar (USDO), a regulated US dollar-backed stablecoin also issued by Paxos Trust,” wrote the company.
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Ibukun is a crypto/finance writer interested in passing relevant information, using non-complex words to reach all kinds of audience.
Apart from writing, she likes to see movies, cook, and explore restaurants in the city of Lagos, where she resides.
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Recently, the US Securities and Exchange Commission (SEC) has come out with tougher regulations on cryptocurrency exchanges. A key question is how do major cryptocurrency players view the regulations?
Coinbase and JPMorgan have had a strong relationship for some time now and this appears to continue despite the SEC’s crackdown on exchanges. Whilst Coinbase is a key player in the cryptocurrency sector, the company has been proactive in working towards regulatory compliance. One example is the launch of its Ethereum-based protocol, a platform that allows users to trade and transfer digital assets while meeting US regulations.
How is JPMorgan affected by the SEC’s move? The banking giant’s relationship with Coinbase dates back to early 2018 when it began offering JPM coin, a digital currency specifically designed for institutional payments. JD Morgan Chase’s interest in blockchain technology, particularly in the emerging digital asset space, has seen it become an industry leader recently, investing in digital assets’ infrastructure and exploring the potential for involvement in crypto-assets.
In spite of the SEC’s increased oversight of cryptocurrency exchanges, Coinbase and JPMorgan still view their partnership positively. In a recent statement, Coinbase’s CEO Brian Armstrong said “although the SEC has been skeptical of cryptocurrency in recent months, we feel that our partnership with JPMorgan is proof that there is still tremendous potential for the industry.”
It appears that the two organizations have kept a cooperative spirit and continue to share expertise towards achieving a common goal – the development of a more efficient and secure financial system. Coinbase’s commitment to compliance and the great potential of innovations within the sphere of digital assets has allowed the company to triumph exceeding expectations. Next, Coinbase has set its sights on potential collaborations with other organizations such as asset managers and banks to expand its services.
The recent regulatory crackdown by the SEC has caused concern in the cryptocurrency sector, however, the relationship between Coinbase and JPMorgan appears to remain intact. Through their combined innovation and bureaucratic compliance, both organizations could be instrumental in shaping the way the sector develops in the future.
