The clash between BUSD issuer Paxos and the U.S. Securities and Exchange Commission is escalating daily. Today, Coinbase shared a thread of tweets that cleared its official stance on the matter.
Coinbase recently took to Twitter to update its community on the recent developments in the SEC and Paxos case. In the first tweet, Coinbase made it clear that it had no insight into "what aspects of BUSD might be of interest to the SEC". Nevertheless, the company was adamant in its stance on the legality of stablecoins, asserting that "What we do know: stablecoins are not securities". This thread went on to provide a detailed explanation of the matter.
Recently, the U.S. Securities and Exchange Commission (SEC) issued a Wells Notice to Paxos, the issuer of the BUSD stablecoin, claiming that they should have registered with the SEC as stablecoins may be considered securities. Although it is still unclear whether stablecoins are considered securities or assets in the U.S., Paxos was asked to cease issuing any ‘US dollar-denominated stablecoin BUSD’.
In further tweets, Coinbase went on to explain the concept of stablecoins and how they work, in an effort to dispel any misunderstandings about the technology and to provide further insight into why they are considered securities. Stablecoins are a type of cryptocurrency that is backed 1:1 by U.S. dollars, meaning that they are not considered investment securities. You can read about stablecoins in detail here.
Coinbase stated that stablecoin stakeholders do not seek returns, but rather a stability in a crypto asset. Coinbase further highlighted the advantages that stablecoins offer over traditional fiat currencies. Transactions involving stablecoins are more secure, private, and rapid. Furthermore, they are not restricted by banking hours, providing a more convenient way to conduct commerce.
Coinbase has made it abundantly clear that enforcing the label of securities on stablecoins with heavy-handed regulatory force, rather than through guidance or dialogue, could be counter-productive. The unprecedented power of regulatory bodies can push the innovation offshore, taking advantage of what America has in blockchain innovation. Such a move could have far-reaching implications, not only for the US economy but for the global economy as a whole.
Coinbase said that the majority of stablecoins are subject to U.S. state money transmitter laws, with Paxos being regulated by the New York Department of Financial Services. To conclude the thread, Coinbase implored regulators to come forward and engage in an open dialogue to regulate the blockchain industry, including stablecoins.
The firm stands by a leading cryptocurrency exchange and ensures that taking a toll on crypto businesses just for the sake of regulation would not be tolerated for very long. Instead of clarifying clear laws of blockchain regulations, SEC is busy picking up on crypto businesses without any evidence. A clear dialogue on the blockchain regulation is not only welcome but an extreme need of the hour.
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