Coinbase To Launch Bermuda Ops Amid SEC Lawsuit Threat

Coinbase Global (NASDAQ: COIN) has secured a license to operate in Bermuda, indicating that the company is doubling down on plans to expand its foreign operations at a time when US regulators have proven unfriendly to the crypto industry.

In a blog post on Wednesday, the business announced that it had received the license from the Bermuda Monetary Authority, the island nation’s integrated financial regulator, which was one of the first in the world to implement a full regulatory framework for digital assets in 2018.

According to a source, Coinbase intends to open an offshore derivatives exchange in Bermuda as soon as next week.

This comes after CEO Brian Armstrong indicated that the crypto firm could move out of the US amid regulatory issues with the Securities and Exchange Commission, saying “anything is on the table, including relocating or whatever is necessary.”

“I think the U.S. has the potential to be an important market for crypto, but right now we are not seeing that regulatory clarity that we need,” he said at Fintech Week in London. “I think in a number of years if we don’t see that regulatory clarity emerge in the U.S. we may have to consider investing more elsewhere in the world.”

Coinbase is currently embroiled with regulatory hurdles after the SEC issued the firm one of its infamous Wells Notices–a document that’s usually a precursor of a lawsuit by the regulatory agency. This is part of the SEC’s intensifying crackdown on crypto firms, arguing that their digital assets are considered securities and must be regulated under the purview of the agency.

In response, the company did not hold back in the battle it has had in seeking regulatory certainty from the commission, commenting that they provided two different potential registration models for the exchange, and others in the crypto space. 

“We developed and proposed two different registration models. We spent millions of dollars on legal support to build these proposals and repeatedly asked for the SEC’s feedback. We got none. We also reiterated that we stand by our listings process – we don’t list securities today – and repeatedly invited the SEC to raise any questions about any asset at all on our platform. They raised none,” they wrote.

Armstrong’s remarks at Fintech Week come just weeks after rival exchange Bittrex announced its intention to leave the United States by the end of April, citing “the current U.S. regulatory and economic environment.” The SEC Enforcement Division discovered evidence of legal infractions in March, according to general counsel David Maria.

On Monday, the SEC filed a lawsuit against the exchange–a similar fate is expected for Coinbase after receiving its Wells notice.

“We actually have contradictory statements from the heads of the CFTC and the SEC coming out almost every few weeks. How’s a business going to operate in that environment? We just want a clear rulebook,” Armstrong added.

According to the chief executive, there is a lack of differentiation or nuance in how authorities evaluate the various arms of the bitcoin industry. Exchanges like Coinbase should be regulated similarly to financial services businesses, whereas decentralized sections of the industry should be treated significantly differently due to the lack of a centralized regulatory authority.

“Things like Bitcoin, Ethereum, DeFi and even self-custodial wallets should be regulated like a software business or something like that,” he said.

In a supplemental release, SEC Chair Gary Gensler said proposals for expanding regulatory procedures to include updated definitions that would cover cryptocurrency are being studied. But, he clarified that “many crypto trading platforms already come under the current definition of an exchange and thus have an existing duty to comply with the securities laws.”

“Calling yourself a crypto platform is not an excuse to ignore the securities laws. Calling yourself a DeFi platform is not an excuse to defy the securities laws,” Gensler wrote.

Coinbase’s Bermuda license also comes on the heels of a March report by Bloomberg that Coinbase has been contacting institutional customers about a new offshore trading platform, as well as collaborating with market makers and financial firms to develop such a service in addition to its basic Coinbase marketplace.

Coinbase, situated in San Francisco, would be better positioned to confront Binance, which dominates the global crypto trade, and diversify its revenue source by creating an offshore exchange in Bermuda.

However, observers note that Coinbase is unlikely to leave the United States in the immediate future, given that it has long emphasized its record of compliance in its native nation and is widely viewed as law-abiding by lawmakers and regulators.

“As we have said previously, our approach globally will be consistent with our approach in the United States: we will work with governments and regulators in different markets, and will always aim to be the most trusted and compliant crypto company in any market,” the firm said in its blog.

Coinbase Global, Inc. last traded at $62.72 on the NASDAQ.

Information for this briefing was found via Fourtune, Coindesk, and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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