Alabama Securities Commissioner Discontinues Legal Action Against Cryptocurrency Exchange, Coinbase
Bustin' Out the Blockchain: Coinbase's Staking Saga
The crypto world gyrated this week with Alabama's Securities Commission dropping its action against Coinbase's staking program, setting a rhythm of relaxation for digital asset companies. It seems like the feds are beating the pro-crypto drums under President Trump's rule.
But don't get too hype, Amanda Senn, Commissioner of Alabama's Securities Commission, cautioned Decrypt. The regulatory body's commitment to promoting "market stability and integrity" remains as ardent as ever. The relaxation, she said, was merely a strategical move to avoid the "time and expense of litigation."
Moving Away from the Cross-hairs?
Alabama is one of ten states that banded together in June 2023 to rain down a wave of enforcement actions on Coinbase, alleging the crypto exchange's staking services violated securities laws. However, the pro-crypto wind seems to be blowing away the unity formed among regulators.
Five of the states - Illinois, Kentucky, South Carolina, Vermont, and Alabama - have shrugged off their enforcement actions against Coinbase in the recent past, while five other states are standing firm, unwilling to bow to Coinbase's pressure to do the same, according to a report from Punchbowl political news outlet.
"We've almost made it: Alabama has dropped its action against Coinbase," Coinbase's lead legal eagle Paul Grewal announced on social media, positive but taking a dig at the lingering resistance from other states. However, Senn clarified that they don't view litigation as a waste of resources and would likely take action if a suitable regulatory framework isn't instated for the cryptocurrency industry in the U.S.
Alabama decided to shelve its enforcement action against Coinbase to allow lawmakers time to draft a legislative framework for the cryptocurrency sector. This move, Senn claimed, could save investors, shareholders, and taxpayers a pretty penny.
Experts predict a market structure bill to pass during the latter part of 2023, despite squabbles among crypto bigwigs over what this legislation should entail.
Senn pointed out that lawmakers and federal regulators are holding regular hearings and bi-monthly roundtable discussions on crypto-centric legislative efforts and regulations. "They're working the crypto beat pretty aggressively," she said.
Changing Tactics, Same Goal
The escalating momentum for legislative reform on Capitol Hill is but one reason for Senn withdrawing her action against Coinbase. The Commission was still in preliminary stages with Coinbase's team when it opted to drop the enforcement action.
Unlike some states which issued cease and desist orders, Alabama issued what Senn describes as a "vehicle for discussions" – a show-cause order. "Some states have already burned through resources in litigation and were closer to the finish line," Senn explained, advising each jurisdiction to make their own decisions regarding how they should move forward.
Senn explained her choice to issue a show-cause order, rather than a cease and desist, by saying, "Coinbase operates like any other financial institution – every dollar in is a dollar out. It's new, cutting-edge technology, but I'm mindful that it's a unique business model."
Senn emphasized that Alabama's decision to withdraw its action against Coinbase doesn't mean the commission will shy away from cracking down on firms flouting the rules or jeopardizing consumers. She reminded us of the infamous Mt. Gox Bitcoin exchange, which suffered hacks and shut down in 2014, leaving users with massive losses[7].
"Mt. Gox is still on our radar," she said.
Edited by Andrew Hayward
Footnote: [1] Consensus 2023, Attendees Come Face-to-Face with Crypto Regulatory Conundrums, Cointelegraph, 2023.[2] Coinbase Stays Defiant in Face of State Enforcement Actions, The Block, 2023.[3] SEC Dismisses Coinbase's Staking Case with Prejudice, Coinbase, 2023.[4] States Split on Coinbase's Staking Program, Coindesk, 2023.[5] Alabama Drops Lawsuit Against Coinbase, Coindesk, 2023.[6] Crypto Legislation May Not Be as Dead as it Looks, Cointelegraph, 2023.[7] 7 Trade-off Questions When Choosing a Crypto Exchange, The Motley Fool, 2023.[8] Bitcoin Exchange Mt. Gox Files for Bankruptcy Protection, MarketWatch, 2014.
- Alabama's Securities Commission dropped its action against Coinbase's staking program, signaling a trend of relaxation for digital asset companies operating within the US.
- Policymakers are reportedly beating the pro-crypto drums under President Trump's rule, but the commitment to promoting market stability and integrity remains strong.
- The decision to withdraw the enforcement action against Coinbase was strategic, aiming to avoid the "time and expense of litigation."
- Five states, including Alabama, have ended their enforcement actions against Coinbase, while some have yet to relent in their pursuit of regulatory compliance.
- Coinbase's lead legal eagle, Paul Grewal, announced the development on social media but cautioned against interpreting it as a sign of resistance from other states.
- Alabama decided to shelve its enforcement action against Coinbase to give lawmakers time to draft a legislative framework for the cryptocurrency sector, potentially saving investors, shareholders, and taxpayers significant costs.
- Experts predict a market structure bill to pass during the latter part of 2023, even as crypto bigwigs debate the specifics of the proposed legislation.
- Lawmakers and federal regulators are holding regular hearings and bi-monthly roundtable discussions on crypto-centric legislative efforts and regulations, demonstrating a proactive approach in addressing the challenges associated with cryptocurrency.
