Coinbase: SEC approval ‘not needed’ for Keystone deal

July 20, 2018
Chris Wheal

Coinbase has backtracked on its statement last Tuesday that the US Securities and Exchange Commission (SEC) had granted authorisation for it to list security tokens on its exchange.

Coinbase logo

Coinbase has backtracked from last Tuesday’s statement

The San Francisco-based cryptocurrency exchange now says that SEC approval was not given, because it was not needed in the first place.

On July 17, reports stated that Coinbase had won approvals from the SEC and Financial Industry Regulatory Authority (FINRA) to acquire Keystone Capital, Digital Wealth, and Venovate Marketplace, three firms which help the digital asset player secure an alternative trading system (ATS) licence, broker-dealer licence and registered investment advisor (RIA) licence respectively.

Coinbase spokesperson Rachel Horowitz now says the company’s discussions with Keystone entity was conducted with SEC staff on an “informal basis,” with no direct involvement of the regulatory watchdog in the acquisition deal – although it has secured such approval from FINRA.

A fraught relationship

The SEC has a fraught relationship with cryptocurrency firms: Shutterstock

The original announcement gained attention because of the traditionally fraught relationship between SEC and cryptocurrency firms, with the authority cracking down on several cryptocurrency businesses in the past, including exchange and wallet services. In March, the SEC said that cryptocurrency exchanges would be required to register with the regulatory body before they could list tokens deemed to be securities.

Last Friday, Coinbase announced that it planned to add Cardano (ADA), Basic Attention Token (BAT), Stellar Lumens (XLM), Zcash (ZEC) and 0x (ZRX) to its limited list of cryptocurrencies. This sparked speculation about the regulatory nature of these digital assets, and whether Coinbase would list all of them together.

The exchange said that all cryptocurrency listings were subject to different regulations levied across the globe, adding some assets “may become available in other countries” before the US. As Coinbase is the largest exchange in North America, gaining approval to list tokenised securities would have represented a major move for certain cryptocurrencies.

US corporate lawyer Dean Steinbeck told Cointelegraph: “The SEC will eventually regulate which currencies qualify as security tokens and which do not. Regulated exchanges, like Coinbase, will avoid tokens that do not qualify under SEC guidance.

“I fully expect Coinbase to get approval to engage in broker dealer activities, including the sale of security tokens. Coinbase has positioned itself as the leading regulatory-compliant exchange in the US.”

Post written by Chris Wheal
Chris Wheal is editor of OpenLedger's news and features service. An award-wining business journalists himself, he runs a team of freelance journalists from across the UK and north America.

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