Coinbase CLO once again called on the SEC to clarify that pledge services are not securities, and to contact the public before law enforcement

On March 21st, Paul Grewal, Chief Legal Officer of Coinbase, said on Twitter that today, Coinbase submitted a comment letter to our July 2022 SEC rulemaking petition. We explained why core pledge services are not securities issuance and asked the SEC to clarify the fact that core pledge services are not securities.

Interpretation of this information:

Coinbase, a cryptocurrency exchange based in the United States, submitted a comment letter to the Securities and Exchange Commission’s (SEC) Rulemaking Petition, according to Paul Grewal, the Chief Legal Officer of Coinbase. In a tweet on March 21st, Grewal announced that Coinbase addressed the matter of core pledge services and their classification as securities. Coinbase expressed its opinion that core pledge services are not securities issuance and urged the SEC to clarify this point.

The term “core pledge services” refers to the aspect of cryptocurrency lending where borrowers pledge their cryptocurrencies as collateral to obtain loans. These loans are issued in stablecoins, a type of cryptocurrency whose value is pegged to a traditional currency such as the US dollar. Coinbase, along with other cryptocurrency platforms, has been offering core pledge services for some time.

In its comment letter, Coinbase argued that core pledge services do not function as securities despite being a form of lending. The company believes that the loans issued through core pledge services, although they involve the transfer of assets, do not fall under the guidelines of securities issuance set by the SEC. Coinbase pointed out that core pledge services have significant differences from securities issuance such as the absence of third-party evaluators, the lack of default risk, and fixed interest rates.

Coinbase’s request to the SEC to clarify the classification of core pledge services is a significant move for the cryptocurrency industry. The legal status of cryptocurrencies, including their classification as securities, has been a point of contention for years, and the SEC has been working to provide regulatory clarity.

The financial industry has been paying close attention to the SEC’s actions regarding cryptocurrencies. Early this year, the SEC filed a lawsuit against Ripple, a cryptocurrency company, alleging that the company’s sale of XRP tokens had violated securities laws. The lawsuit highlighted the regulatory challenges faced by the cryptocurrency industry and makes Coinbase’s comment letter even more compelling.