Coinbase CEO says the crypto exchange is preparing to go to court with the U.S. SEC
Coinbase is preparing for a years-long court battle with the U.S. Securities and Exchange Commission, the company’s chief executive told CNBC Tuesday, after the regulator warned the cryptocurrency exchange of potential violations of securities law.
Last month, the SEC issued Coinbase with a Wells notice, which is often one of the final steps before the regulator formally issues charges. It generally lays out the framework of the regulatory argument and offers the potentially accused an opportunity to rebut the SEC’s claims.
Brian Armstrong, CEO of Coinbase, called the issuing of the Wells notice “unfortunate” and said the company has not got any more information on the specific issues the SEC has.
“We’ve met with them over 30 times in the last year … never got a single piece of feedback from them about what we can be doing better or differently, and then this Wells Notice arrived,” Armstrong told CNBC in an interview.
“I think we’re going to have to actually end up going to court to get the clarity we need and create the case law.”
Case law refers to judicial precedent.
The SEC has ramped up its scrutiny on crypto firms, going after companies it alleges are offering unregistered securities. The SEC is using enforcement actions to target firms.
One of its most high profile lawsuits is with a company called Ripple, which has been going on since 2020. The SEC alleges Ripple sold unregistered securities. Ripple disputes the claim.
When asked by CNBC if Coinbase is prepared for a years-long battle with the SEC, Armstrong replied, “Absolutely.”
“We never seek litigation but it seems in this case they have initiated it and if we need to go to the courts to get the clarity that we need then we are very prepared to do that,” Armstrong said.
The cryptocurrency industry has complained that the SEC has not given companies clarity on what they can and cannot do. The SEC, meanwhile, argues that the rules are clear under existing laws.
Armstrong accused the SEC of an “abdication of responsibility.”
“The regulators’ job is to publish a clear rulebook and allow that market to be safe but also to flourish in that country and I think they’ve completely abdicated responsibility,” Armstrong said.
The SEC was not immediately available for comment when contacted by CNBC.
Brian Armstrong, CEO of Coinbase, slammed the U.S. Securities and Exchange Commission. He also said the cryptocurrency exchange is looking to invest more outside of the U.S.
Carlos Jasso | Bloomberg | Getty Images
Investors in Coinbase, which is listed in the U.S. and whose stock is up around 90% this year, will be watching how the SEC issue plays out. Barclays said in a note this month that “regulatory overhang” on Coinbase’s stock “increased meaningfully” when the SEC issued the Wells notice.
“We think the most onerous outcome could be that, if various crypto assets are deemed securities, Coinbase would therefore need to register as a securities exchange, in order to keep offering trading in those assets,” Barclays added.
“Furthermore, under current securities law, securities exchanges are not permitted to offer services directly to retail customers, and Coinbase could theoretically be forced to separate the exchange and broker portions of the business.”
Coinbase considers relocating from the U.S.
On Tuesday, Armstrong spoke at a fintech event in London. He said said the U.S. “has the potential to be an important market in crypto” but right now is not delivering regulatory clarity. If this goes on, he said, then Coinbase would consider options of investing more abroad, including relocating from the U.S. to elsewhere.
“I think if a number of years go by where we don’t see regulatory clarity around us … we may have to consider investing more elsewhere in the world. Anything including, you know, relocating,” Armstrong said.
He added that the company is “looking at other markets” to invest in beyond the U.S. and was “probably going to invest more” in the U.K., given in its push to position itself as a crypto hub.
“We’re a business … like any business we have a budget and we have to decide where to allocate it. And so that means what products we want to build, but it also means what countries we want to invest it in any given year,” Armstrong told CNBC.
“And with the U.S. kind of lagging a little bit … we are looking at other markets.”
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European tech CEOs urge ‘Europe-first’ mentality to counter U.S. dominance after Trump victory
Thomas Plantenga, CEO of used fashion resale app Vinted, on center stage during Web Summit 2024 in Lisbon, Portugal.
Harry Murphy | Sportsfile for Web Summit Getty Images
LISBON, Portugal — Tech CEOs in Europe are urging region al countries to take bolder action to tackle Big Tech’s dominance and counter reliance on the U.S. for critical technologies like artificial intelligence after Donald Trump’s electoral win.
The Republican politician’s victory was a key topic among prominent tech bosses at the Web Summit conference in Lisbon, Portugal. Many attendants said they’re unsure of what to expect from the U.S. president-elect, citing this unpredictability as a core challenge at present.
Andy Yen, CEO of Swiss VPN developer Proton, says Europe should echo American protectionism and adopt a more “Europe-first” approach to technology — in part to reverse the trend of the last two decades, during which much of the Western world’s most important technologies, from web browsing to smartphones, have become dominated by a handful of large U.S. tech firms.
VPNs, or virtual private networks, are services that encrypt data and mask a user’s IP address to hide browsing activity and bypass censorship.
“It’s time for Europe to step up,” Yen told CNBC on the sidelines of Web Summit. “It’s time to be bold. It’s time to be more aggressive. And the time is now, because we now have a leader in the U.S. that is ‘America-first,’ so I think our European leaders should be ‘Europe-first.'”
One key push for the past decade from the European Union has been to take legal action and introduce tough new regulations to tackle the dominance of large technology players, such as Google, Apple, Amazon, Microsoft and Meta.
As Trump prepares to come into power for a second mandate, concerns have now mounted that Europe might reel in its tough approach to tech giants out of fear of retaliation from the new administration.
US Big Tech playing ‘extremely unfairly’
Proton’s Yen, for one, urged the EU not to water down its attempts to rein in America’s tech giants.
“Europe has been thinking in a very globalist mindset. They’re thinking we need to be fair to everybody, we need to open our market to everybody, we need to play fair, because we believe in fairness,” he told CNBC.
“Well, guess what? The Americans and the Chinese didn’t get the memo. They have been playing extremely unfairly for the last 20 years. And now they have a president that is extremely ‘America-first.'”
Mitchell Baker, former CEO of American open internet non-profit Mozilla Foundation, said the EU’s DMA has led to meaningful changes for the Firefox browser, with activity increasing since Google implemented a “choice screen” on Android phones that enables users to select their search engine.
“The change in Firefox new users and market share on Android is noticeable,” Baker said. “That’s nice for us — but it’s also an indicator of how much power and centralized distribution that these companies have.”
She added, “This change in usage because of one choice screen isn’t the full picture. But it is an indicator of the kind of things that consumers can’t choose and that businesses can’t build successfully because of the way the tech industry is structured right now.”
Thomas Plantenga, CEO of Lithuania-headquartered used clothing resale app Vinted, urged Europe to take the “right choices” to ensure the continent can “fend for ourselves” and does not get “left behind.”
“If you look very realistically at what countries do, they try to take care of themselves and they try to form coalitions to be stronger themselves, and as a coalition be stronger,” Plantenga told CNBC in an interview. “We have a lot of very talented, well-educated people.”
“We need [to] ensure that we can take care of our own safety, that we can take care of our own energy, that we ensure to keep on investing in our education and innovation so that we can keep up with the rest [of the world],” he stressed. “If we don’t, then we’ll be left behind. In every collaboration, it’s always a trade. And if we don’t have much to trade, we become weaker.”
‘AI sovereignty’ now a key battleground
Another theme that attracted much chatter on the ground at Web Summit was the idea of “AI sovereignty” — which refers to countries and regions localizing critical computing infrastructure behind AI services, so that these systems become more reflective of regional languages, cultures and values.
With Microsoft becoming a key player in AI, concerns have surfaced that the maker of the Windows operating system and Office productivity tools suite has secured a dominant position when it comes to foundational AI tools.
The tech giant is a key backer behind ChatGPT maker OpenAI, whose technology it also heavily uses in its own products.
For some startups, Microsoft’s decision to embrace AI has resulted in harmful, anti-competitive effects.
Last year, Microsoft hiked the fees it charges search engines to use its Bing Search APIs, which allow developers access to the tech giant’s backend search infrastructure — in part because of higher costs attached to its AI-powered search features.
“They’re gradually reducing our revenue — we’re still relying on them — and that reduces our capacity to do things,” Christian Kroll, CEO of sustainability-focused search engine Ecosia, told CNBC. “Microsoft is a very fierce competitor.”
CNBC has reached out to Microsoft for comment.
Ecosia recently partnered with fellow search provider Qwant to build a European search index and reduce dependence on U.S. Big Tech to deliver web browsing results.
Meanwhile, the European Union’s AI Act, a landmark artificial intelligence law with global implications, introduces new transparency requirements and restrictions on companies developing and using AI.
The laws are likely to have a big impact on predominantly U.S. tech firms, since they’re the ones doing much of the development of — and investment in — AI.
With Trump set to come into power, it’s unclear what that could mean for the global AI regulatory landscape.
Shelley McKinley, chief legal officer of code repository platform GitHub, said she can’t predict what Trump will do in his second term — but that businesses are planning for a range of different scenarios in the meantime.
“We will learn in the next few months what President-elect Trump will say, and in January we will start seeing some of what President Trump does in this area,” McKinley said during a CNBC-moderated panel earlier this week.
“I do think it is important that we all, as society, as businesses, as people, continue to think about the different scenarios,” she added. “I think, as with any political change, as with any world change, we’re still all thinking about what are all of the scenarios we might operate.”
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