Coinbase SEC approval debacle shines light on progression to list securities 18838
Analysis
Chaitanya Thammaya
Jul 20, 2018 at 2:00 PM

The recent SEC approval debacle involving Coinbase raised a huge hue and cry in the cryptocurrency community. A few days earlier, the American exchange announced that they had received SEC approval to list security tokens. But soon after, personnel from the exchange issued a clarification that they didn’t receive any such approval. Obviously, this did not go down too well with the crypto community which had hailed it as a boon.

According to the crypto community, Coinbase’s announcement would be a boon to projects looking to launch ICOs. According to SEC rules, crypto exchanges looking to list tokens that are deemed securities must register with the regulatory body. And if Coinbase, the largest exchange in America could list securities, several cryptos would’ve benefitted from this move.

The “real” statement by Coinbase

In an email dated July 17th, Coinbase spokesperson Rachael Horwitz said,

“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. “The SEC’s approval is not required for the change of control application. 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.”

See Also: XRP users call on FINRA to probe Coinbase for possible price manipulation

So, it seems that the exchange didn’t need any endorsement from the regulatory body for its intended purchases. In their first announcement, Coinbase had announced that they intend to buy Keystone Capital Corporation, an equity and securities brokerage. They also plan on acquiring Venovate Marketplace Inc., a broker-dealer firm and financial planning company, Digital Wealth LLC.

These acquisitions would allow the American exchange to operate as a broker-dealer and alternate trading platform. Additionally, it would also function as a registered investment adviser and be able to list securities on its platform. But now it seems that the exchange jumped to conclusions that the acquisitions would allow them to list securities.

Asiff Hirji, the chief operating officer of CoinBase had made a misleading statement in a blog post on July 6. He wrote,

“This step forward is being made possible by our acquisition of a broker-dealer license (B-D), an alternative trading system license (ATS), and a registered investment advisor (RIA) license.”

See Also: CheapAir ditches Coinbase, embraces BTCPayServer

But, there’s more to the story!

This entire debacle could have a positive side. It seems that cryptocurrency exchanges are progressing towards listing tokenized securities on their platforms. According to Anthony Pompliano, the crypto sphere will get a different kind of stimulus from tokens that are deemed securities. In an interview with Cointelegraph, the founder and partner at Morgan Creek Digital Assets, said,

“Tokenized securities have a different risk/return profile, and are ultimately different than the rest of the crypto industry. One of the key differences is that the tokenized securities are likely to be redeemable as equity, debt or cash flows. As more investor interest flocks to this new space, there should be spillover interest into the more traditional crypto markets as well. This is not a binary world and it will be likely that Bitcoin, crypto, and tokenized securities all coexist successfully.”

This inclination to list tokenized securities on digital asset exchange platforms signals a shift in the market. It could lead to several cryptocurrency exchanges listing new tokenized securities on their platforms. So Coinbase’s premature statement could actually become a reality in the coming months. This new dynamic will give rise to better growth and development of projects in the crypto space.

Image via Shutterstock

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