SEC Approves Coinbase to List Security Tokens?

Prominent crypto exchange and digital wallet provider Coinbase announced on July 16th that they had officially been greenlit by the U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) to list security tokens on their exchange. Initial reports detailed that the company was given the go-ahead to purchase security dealers Keystone Capital Corp., Venovate Marketplace Inc., and Digital Wealth LLC, positioning Coinbase to add securities tokens to its list of offerings. News outlets reported Coinbase was also working to secure licenses to provide broker-dealer, alternative trading system, and registered investment advising services, and that they may work to tokenize traditional financial assets in the future.​

That announcement was corrected one day later by a Coinbase spokeswoman. “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,” Coinbase spokeswoman Rachael Horwitz said in an email to Bloomberg. “The SEC’s approval is not required for the change of control application,” said Horwitz. “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.” A representative for the SEC confirmed that the agency did not give Coinbase explicit approval for the deal. A FINRA spokesperson declined to comment.

The back-and-forth comes at a time of increased scrutiny for cryptocurrency-related services. Initial coin offerings, or ICOs, have been under fire from the SEC for some time, with chairman Jay Clayton publicly expressing his belief that every ICO he has seen qualifies as a security. Despite such statements, the current regulatory climate exists very much in flux, and the resulting legislative gray area makes it difficult for companies to take concrete action. Official definitions about “which digital currencies and assets are securities, which ones are commodities, money or currency…would be immensely helpful,” said Coinbase general manager Dan Romero in an interview with crypto news site CoinDesk.

But San Francisco-based Coinbase has been reluctant to sit and wait. The acquisition deal comes on the heels of a recent statement from the SEC that crypto exchanges must register with the commission to trade tokens that are securities – digital currency exchanges would also be subject to the same rules as traditional exchanges. An additional flurry of activity from the company included announcing plans to list new coins for trading, as well as an effort to establish the technology needed for future support of all tokens on the ERC20 blockchain. Coinbase appears to be positioning themselves to take advantage of a finalized regulatory framework with a diverse range of offerings. When that framework will arrive is still an open question.