Cryptocurrency exchange Coinbase voiced support for Ripple in the blockchain company's legal battle with SEC that lasted nearly two years. The company filed a request for an amicus curiae or “friends of the court” rule and formally applied to the US District Court.
The confrontation between Ripple and the SEC plays a special role for the future of the crypto industry both in the US and in the world. The regulator officially sued Ripple and its executives in December 2020.
They claimed that the Ripple’s XRP token was classified as securities and was not officially registered. According to the Commission, the crypto exchange violated federal securities laws in conducting unregistered securities sales that generated $1.3 billion.
However, Ripple founders do not agree with SEC findings and believe that the regulator’s actions have caused direct and collateral damage not only to the company itself, but also to users. Following the SEC’s action, crypto exchanges in the U.S. began delisting XRP on their platforms, so the exchange has suffered serious reputational damage.
The SEC has been inconsistent with how it polices the crypto industry, creating “uncertainty” for companies in the space. And frequent high-profile statements by Chairman Gary Gensler have led to the fact that the regulator considered a lot of crypto platforms to be a major threat to the industry. This was the reason why Ripple got supporters who are ready to defend the exchange in court.
The platform was initially supported by the non-profit industry organization Blockchain Association, lawyer John Deaton and the SpendTheBits mobile app.On October 31, Coinbase come out to support the fintech company and filed a request for an Amicus Brief in support of Ripple's “fair notice defense”.
In the official document, the platform representatives pointed out a number of reasons why the existing securities legislation is not keeping up with the fast-growing ecosystem of virtual assets and the ways of selling, exchanging and storing them. This allows industry representatives to criticize the regulator, whose statements and actions can not always be considered correct:
Instead of engaging in rule-making, the current SEC administration has sought to expand jurisdiction over the cryptocurrency industry through special enforcement measures.
The report states that the SEC has often made retrospective decisions regarding assets, labeling them regulatory securities. However, the absence of a regulatory framework, combined with sudden enforcement action by the Commission, creates uncertainty in the market and disadvantages for US crypto exchanges, which “compete with offshore platforms in jurisdictions where there is no risk of surprise from regulators”.
In addition, the authors of the statement draw the attention of the court to the fact that in 2018 SEC representatives made a number of statements according to which mature and long-traded cryptocurrencies are not considered as securities. In particular, such conclusions could be drawn from the speech of William Hinman, Director of the SEC's Division of Corporation Finance.
Coinbase is confident that cryptocurrencies are an important element of the modern financial market, while the SEC has not yet created appropriate guidance on crypto regulation. As far as law enforcement goes without rule-making, this tactic only hurts the industry. But the authors of the report continue to expect the Commission to take steps towards the crypto sphere:
Coinbase remains hopeful that the SEC will seize the opportunity to engage with public stakeholders to fashion pragmatic cryptocurrency regulations.
