Coinbase Receives Wells Notice | Hacker News Reader

Coinbase Receives Wells Notice

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53 pointsnkw13 comments

From what I am understanding of this, it is a notice from the SEC specifically focused on the current question if staked coins are a security.

This is not the end of Coinbase or crypto.

If staking is deemed to be a security, it will have an impact on crypto, and as far as I understand, it means that PoS coins would need to be registered with the SEC as securities, or potentially Coinbase would be the registered party required to govern the coins they offer to stake.

Am I understanding this correctly?

From Coinbase's blog, looks like it covers a lot, not just staking but multiple services:

https://www.coinbase.com/blog/we-asked-the-sec-for-reasonabl...

Today, we are disappointed to share that the SEC gave us a “Wells notice” regarding an unspecified portion of our listed digital assets, our staking service Coinbase Earn, Coinbase Prime, and Coinbase Wallet after a cursory investigation.

The issue isn't whether proof of stake itself is a security, it's whether Coinbase's service of staking on behalf of its customers is a security.

Coinbase has argued that all they are doing is providing IT services to do what their customers could do on their own. How well that holds up in court really depends on the arguments that the SEC makes, and how the courts views Coinbase's response.

Thanks for that. I was wondering why ETH vs BTC wasn’t affected (although since the 13th ETH has dropped significantly ~-10% versus BTC, so maybe professional investors know something?).

Disclaimer: I own some COIN shares (to get exposure to crypto without having to own crypto.). Aside: Coinbase had dropped ~6% during the day before the notice and has dropped a further ~13% in after-hours trading since the after-hours SEC notice.

Coinbase is mostly for a US audience, and crypto is generally less useful in countries with a relatively stable currency and banking system. It doesn’t really matter to crypto prices whether or not coinbase exists.

> and crypto is generally less useful in countries with a relatively stable currency and banking system

Crypto is massively affected by say the USA because it is invested in as an asset class by major funds. One signal showing that is that ETH and BTC are highly correlated, sometimes even after news that you might expect to mainly affect only one of those two.

> It doesn’t really matter to crypto prices whether or not coinbase exists.

I am assuming the opposite: that Coinbase valuation depends on the ebullience of the general crypto market.

Note that I do believe that US retail has some effect on market prices, and strict SEC regulations will indirectly deter home investors (perhaps the raison d’être for the SEC actions), so SEC actions against Coinbase potentially do affect the market price for crypto somewhat (assuming some of the market valuation is dependent on wealthy investors such as people in the US).

There is a symbiosis and reflexivity (~recursion) between many of the elements in the system, and simplistic linear cause-and-effect thinking can be risky.

If there is any impact on crypto prices from coinbase shutting down, it would be a positive one as US crypto holders would no longer be able to cash out, forcing them to purchase goods and services directly with crypto.

ETH and BTC are corollated because most liquidity is in BTC for legacy reasons. Most likely this corellation will break down over time.

https://threadreaderapp.com/thread/1638654192138199041.html

A blog I read make such a prediction yesterday...astute. Not the same thing, but shows the precarious situation it finds itself in:

What happens if Coinbase is cut off from banking? FTX was a total scam; Coinbase is a completely legitimate company—the only really, deeply, compliant exchange. Once CB cannot bank, the precedent is set—no one in crypto can touch the banking system. Forever. And as we’ll see, it doesn’t even need to be forever.

What about a Wells Notice for staking/asset listings you to believe the SEC is planning to push Coinbase into unbanked status, and why would you give it any ounce of credibility? Oh that's right, because it's a crypto skeptical take :)

The Wells notice has nothing to do with their banking connections.

Edit: the parent comment previously made the claim that this was predicted by various unrelated claims in a linked blog post, and later modified it to make it appear they were not making that association.

> Moreover, this trillion has a higher propensity to spend than most of the investor wealth that gets destroyed—so there will be proportionately macroeconomic effects. Deflationary effects. This money that people thought they had, was not money, and now cannot be spent. Sad!

Nice, maybe this should be tried to deal with inflation instead of rising interest rates.

Finally.

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