In a series of seven tweets Wednesday, Coinbase CEO Brian Anderson revealed that his company has received a Wells notice from the Securities and Exchange Commission, typically a precursor of enforcement action.
In the tweets, Anderson said Coinbase rigorously assesses the assets for inclusion on its exchange and rejects more than 90% of the applicants, noting: “We are right on the law, confident in the facts, and welcome the opportunity for Coinbase (and by extension the broader crypto community) to get before a court.”
The news comes at a time of tumult for the industry with regulators and legislators. The SEC and its chairman, Gary Gensler, have been perceived within the industry as particularly hostile to cryptocurrency as it leads the charge toward regulation.
Anderson vs. SEC
In the tweets, Anderson said the SEC reviewed Coinbase “in detail” two years ago in approving it to go public and that its filing was clear on its listing process and “included 57 references to staking.”
“Going forward,” Armstrong wrote, “the legal process will provide an open and public forum before an unbiased body where we will be able to make clear for all to see that the SEC simply has not been fair, reasonable, or even demonstrated a seriousness of purpose when it comes to its engagement on digital assets.”
On its website landing page, Coinbase claims 108 million customers—individuals and businesses. It offers solutions for institutional investors, as well as buying and selling services for individuals, collectors, creators, and borrowers.
Coinbase has also avoided the pitfalls suffered by other prominent exchanges, such as FTX.
It’s undeniably a tough period for the cryptocurrency and digital assets, as the industry waits and hopes for a coherent national policy to emerge and watches states sweep in to fill regulatory vacuums.
James Wester, the Director of Cryptocurrency and Digital Assets at Javelin Strategy & Research, sees the SEC’s move as not just a bad sign for Coinbase but also for the industry at large.
“This is one more occasion where regulators have decided to go after the good actors in the space,” Wester said. “Crypto has undoubtedly attracted plenty of bad actors, but Coinbase is not one of them. Like many companies in the space, Coinbase has pushed for clear regulations and oversight with the full intention of complying with those regulations.”
What a Wells Notice Is
Wells notices date to 1972 and are named for John A. Wells, the chairman of an SEC committee formed by then-Director William A. Casey to review the agency’s enforcement practices and policies.
A Wells notice goes out to signal a possible enforcement action by the SEC and to give the recipient an opportunity to provide information about why such action shouldn’t be pursued.
Armstrong said he’s intent on taking that opportunity.
“We are proud to stand up for our customers and the industry in these moments,” he tweeted.
Said Wester: “We still don’t know what the Wells notice is in reference to, but it is looking more like the companies that are trying to do the right thing are finding themselves targeted. That’s not an encouraging sign.”