Professor cautions SEC that its action against Coinbase is a "serious mistake"
If the Securities and Exchange Commission (SEC) pursues an investigation into Coinbase and other significant crypto exchanges, the agency would be making a "serious mistake," according to a former advisor to the SEC.
The SEC is reportedly planning to investigate Coinbase for listing cryptocurrency assets that it believes qualify as unregistered securities.
And J.W. Verret, an associate professor of law at the Antonin Scalia Law School who specializes in securities and finance, seems to be on the exchange's side.
Verret, who recently served on an SEC advisory committee, stated in a Wall Street Journal opinion piece that if the commission moved forward with what it allegedly wants to do, it would be essentially shooting itself in the foot.
"The SEC’s position – that most tokens are securities and must register or face enforcement – is obtuse," wrote Verret. "It’s also an approach that works to the benefit of the scammers and hucksters who have abused the crypto space."
He asserted that the federal securities law, which has been in place since the 1930s, needs to be "rethought," in order to keep up with innovation. According to the professor, the "facets" of cryptocurrencies "would shock the drafters of the 1933 Securities Act" and make the law ineffective for dealing with the problems of the digital age.
He defended his position by saying that cryptocurrency developers "wanted to register their projects with the SEC, as traditional public companies are required to, they couldn’t."
Verret made the observation that most cryptocurrency projects lack a board, CEO, or CFO who could "file the requisite paperwork with the commission." H e continued Nor, do they have proxy voting of shares by mail, which the commission still requires companies provide to shareholders."
As well as being "similarly behind the curve" in allowing CEOs to share company information over social media, the SEC "was 10 years late to the game" on the delivery of financial statements electronically, Verret continued. He cautioned against making the same error with cryptocurrency.
The professor urged the SEC to "build a regulatory regime tailored to the needs of crypto investors" and take the commissioner's advice, who is referred to as "Crypto Mom" in the cryptocurrency community, Hester Peirce.
He insisted that everyone would be "better able to separate the legitimate crypto projects from the scams" if Peirce's suggestions were followed.
"Defendants in SEC actions can now use the nebulous character of crypto tokens to their advantage," Verret observed.
He continued saying, "when cases are brought against legitimate enterprises, such as Coinbase, that’s a good thing. When brought against fake projects that steal crypto, it isn’t. The morphable character of crypto tokens will confound [the] cookie-cutter application of the regulated security definition."
Paul Grewal, the chief legal officer at Coinbase, previously retaliated against the organization by claiming that it does not list securities on its platform. Grewal added that the SEC had examined the exchange's methodology for determining whether a coin qualifies as a security.
By fLEXI tEAM