In the regulatory battle between Coinbase and the United States Securities and Exchange Commission (the SEC), the latter has made a strategic move as it has enlisted the expertise of former Chancellor of the Exchequer of the United Kingdom, George Osborne, to help the crypto exchange navigate the current regulatory challenge it is facing.
Since June last year, the Coinbase crypto exchange has been embroiled in a legal battle with the SEC, and the SEC accused Coinbase, Inc. of running its cryptocurrency trading platform without proper registration as a national securities exchange, broker, and clearing agency.
Additionally, it charged Coinbase for neglecting to register its crypto asset staking-as-a-service program before offering and selling it.
The recent move by Coinbase is being viewed as a strategic move that would aid them in countering the growing scrutiny of regulatory authorities. It is also not the firm time that a crypto-related firm has hired a former politician who will help them navigate the complex regulatory landscape surrounding the cryptocurrency realm.
George Osborne is also not the first hire made by Coinbase, who has a past as a prominent political figure. Former U.S. Senator Patrick Toomey, ex-U.S. Secretary of Defence Mark T. Esper, and former U.S. Congressperson Sean Patrick Maloney are also members of Coinbase’s Global Advisory Board, which reflects the crypto exchange’s belief that hiring such prominent political figures with experienced past will help them to counter the recent accusations made by the SEC effectively.
George Osborne boasts extensive experience in government and international affairs. He served as Chancellor from 2010 to 2016; the Chancellor of the Exchequer is a senior government official responsible for overseeing economic and financial matters, particularly related to the country’s treasury and public finances. The role involves significant responsibilities, including Economic policy, budgetary control, taxation, etc.
He was later hired by BlackRock, the largest asset manager in the world, in an advisory role from 2017 to 2021. His recent appointment at Coinbase positions him strategically as the cryptocurrency exchange grapples with the complexities of the evolving regulatory landscape.
Speaking to the news media outlet regarding his recent appointment, Osborne expressed his enthusiasm regarding his recent collaboration with Coinbase. He acknowledged blockchain technology’s impact on the financial world and praised its impact on various sectors, especially online transactions.
He emphasized Coinbase’s pivotal role at the forefront of these innovations, expressing eagerness to contribute to the company’s journey in reshaping the future of financial services.
Since concluding his government tenure in 2016, Osborne has continued to play an active role in various high-level positions and currently serves as the chairman of the British Museum.
The decision to involve Osborne may prove particularly beneficial for Coinbase, which faces SEC allegations of offering unregistered securities. The SEC lawsuit, filed in June, contends that Coinbase failed to register as a broker, national securities exchange, or clearing agency, thus bypassing the necessary disclosure requirements for securities markets.
The SEC specifically identified several tokens, including Solana’s (SOL), Cardano’s (ADA), Polygon’s (Matic), Filecoin’s (FIL), The Sandbox’s (SAND), AXIE Infinity’s (AXS), Voyager (VGX), Dash’s (DASH), and Nexo’s (NEXO), as potentially falling under the category of unregistered securities.
Despite the legal challenges, a January 19th post by Bloomberg senior litigation analyst Elliott Stein suggests that Coinbase has a 70% chance of a full dismissal in the SEC lawsuit.
Stein’s optimism regarding Coinbase having a greater chance of securing a win against the SEC is based on his analysis in which he stated that a significant shift occurred when Coinbase provided a more precise definition of an “investment contract” than the SEC had presented.
In simpler terms, Stein believed that Coinbase’s description of investment contracts was more convincing. He stressed that investing should involve supporting an actual business, not just a system, and a clear and enforceable commitment should be involved.
In his assessment, Stein referenced the SEC vs. Ripple case, where Ripple secured a partial victory in July 2023.
The judge’s ruling stated that XRP is not classified as a security in the context of retail sales on cryptocurrency exchanges. Stein proposed that this decision regarding securities, as seen in the Ripple case, would have a cascading impact on Coinbase’s lawsuit.
Drawing parallels, Stein argued that, similar to the Ripple ruling in July, the sales of digital assets on public exchanges do not align with the criteria set by the Howey test, which determines what constitutes an investment contract.
