Feb 15, 2023
Coinbase Says It Already Complies With SEC’s Crypto Custody Proposal
(Bloomberg) -- Coinbase Global Inc. should not be affected by a proposal from US regulators to make it harder for crypto firms to be “qualified custodians,” Paul Grewal, the company’s chief legal officer, said on Bloomberg TV Wednesday.
“I think that when it comes to Coinbase, we see SEC officials recognize that specifically Coinbase is operating in a qualified manner,” Grewal said. “In a lot of ways, this is about bringing the rest of the industry to the standard Coinbase has set for itself.”
The US Securities and Exchange Commission on Wednesday proposed expanding its requirements for qualified custodians to cover assets including virtual currencies. The broad changes to the longstanding rules might hit the crypto industry particularly hard as it continues to reel from a regulatory crackdown in a bear market.
The SEC’s plan would require custodians to give assurances that money-manager client assets are properly segregated and protected in the event of bankruptcy or insolvency, as a condition of being able to hold them.
“Make no mistake: Based upon how crypto platforms generally operate, investment advisers cannot rely on them as qualified custodians,” SEC Chair Gary Gensler said in a statement. He said that crypto exchanges that comingle custodial services with other business activities already can’t be qualified as custodians for investment advisers under existing rules.
Many of Coinbase’s existing businesses are under threat from regulators. Rival Kraken’s staking-as-a service recently had to stop serving the US, following an action from the SEC. Likewise, revenue from Coinbase’s support of USDC stablecoin could be under threat, after a regulatory pushback on a Binance-branded stablecoin.
During the interview, Grewal reiterated that Coinbase’s staking products “are not securities.”
“There are important differences between the way Coinbase services operate and the rest of the industry,” he said.
--With assistance from Sonali Basak.
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