Coinbase’s ‘end of story’ is just the beginning for crypto regulation

A FEW days ago, Coinbase Global’s top lawyer issued an unequivocal rejection of the United States Securities and Exchange Commission’s (SEC) allegations that the digital tokens it offers its customers were, in fact, unregistered securities. “Coinbase does not list securities,” Paul Grewal wrote in a blog post. “End of story.”

The end? Given the SEC has opened an investigation into Coinbase’s activities, according to Bloomberg News, this looks more like just the beginning of hard questions about crypto platforms’ business models and their future profit prospects amid a brutal market crash. Crypto’s utopian babble is about to be scrutinised in ways that are likely to fundamentally change the market for digital currencies.

With consumers nursing losses and politicians fearing a backlash, there’s more pressure on regulators to get a grip and ensure — however belatedly — that market rules are followed. Watchdogs such as SEC boss Gary Gensler have plenty of targets that are feathered and quacking but claim not to be ducks: bank-like lending products that aren’t subject to bank-like oversight, digital dollar substitutes that aren’t backed by dollars, trading venues that aren’t registered exchanges, and investment tokens that say they aren’t securities.