Coinbase CLO Criticizes SEC for Confusing Crypto Asset Terms

The U.S. Securities and Exchange Commission (SEC) has seemingly reversed its earlier stance that classified crypto assets as securities.

This change in position arises during the ongoing lawsuit against Binance, one of the leading cryptocurrency exchanges globally.

SEC “Regrets” Any Misunderstanding from Its Language

Paul Grewal, the Chief Legal Officer (CLO) of Coinbase, highlighted the SEC’s shift through an X post on September 13.

In his post, Grewal shared a screenshot of Footnote 6 from the regulator’s amended filing against Binance, clarifying that it was not categorizing crypto assets as securities but was instead discussing the investment contracts pertaining to them. Additionally, the agency expressed that it “regrets any confusion it may have caused” by previously suggesting otherwise.

This development is particularly noteworthy, considering the term “crypto asset securities” has been contentious in the agency’s legal interactions with the industry.

Ripple’s Stuart Alderoty, a vocal critic of the SEC’s terminology, recently lambasted the agency on social media for creating the term “crypto asset security” without a legal basis. “It’s a made-up term with no legal grounding,” Alderoty contended, accusing the regulator of misleading both the courts and the public.

His comments followed the financial authority’s use of this terminology in its case against FTX, alleging that the bankrupt exchange’s stablecoin assets were “crypto asset securities.”

Binance Allegedly Offers Non-Registered Securities

The crypto community has widely criticized the regulator for its inconsistent messaging, with some suggesting it is part of a broader “regulation by enforcement” strategy.

For instance, in the SEC’s lawsuit against Binance, the Commission contends that the exchange offered unregistered securities to the public, which includes its native token, BNB.

Moreover, the regulatory body accused the crypto platform of various improper practices, such as mixing customer assets and participating in wash trading to artificially inflate trading volumes through an entity directed by its former CEO, Changpeng Zhao.

Despite these severe allegations, the crypto exchange has vehemently denied any wrongdoing, asserting that user funds remained safe and that it has consistently adhered to legal obligations.