Bill Morgan, a former SEC and securities attorney, believes Coinbase can never treat Ether (ETH) and/or Bitcoin (BTC) the same way it dealt with XRP when the U.S. SEC sued Ripple, claiming that the sixth-largest cryptocurrency by market capitalization is a security.
Recall that the SEC filed a lawsuit against Ripple in December 2020, alleging that the Silicon Valley tech company violated securities law when it offered XRP for sales, adding that XRP is an unregistered security. Accordingly, Coinbase — the largest U.S.-based centralized trading platform delisted XRP, citing regulatory concerns.
Although Coinbase explained why it delisted XRP, Morgan noted that the exchange would never delist ETH or BTC even though the SEC comes to claim they are unregistered securities. “…Coinbase will never and cannot treat Ethereum the same way as XRP,” he wrote, stating that XRP was easy to sacrifice.
To further buttress his point, he noted that Coinbase’s business model is dependent on BTC and ETH trading on its exchange. Morgan then implied that part of the reason Coinbase delisted XRP was that its trading volume was a much smaller percentage of its total trading volume at the time.
In particular, a recent draft shared by the lawyer showed that the top two crypto assets by market cap form 65% of the exchange’s trading volume. That notwithstanding, the top lawyer noted that “Coinbase is hoping like hell the forthcoming [SEC] complaint doesn’t allege Ether is a security.”
So even if there was a proceeding in which the SEC named Bitcoin or Ethereum as securities @Coinbase would not and could not cease trading of these cryptos because it would be wrecked financially. XRP was more easily able to be sacrificed. It wasn’t 65% of Coinbase’s trading /6
— bill morgan (@Belisarius2020) April 30, 2023
SEC Attack on Coinbase
Recall that Coinbase received a Wells Notice from the SEC in March. For context, a Wells Notice is one of the final steps taken by the SEC before formal charges are issued against a company.
Responding to the Wells notice, Coinbase founder Brian Armstrong said that the exchange is prepared to fight regulators whose administrative and enforcement actions have become a threat to Coinbase businesses in the U.S. Also, the SEC has questioned Coinbase’s staking platform, declaring some of the supported cryptoassets securities that must be registered with the agency.
While some believe the exchange doesn’t have a fair notice defense for both BTC and ETH, should the SEC name them securities, Morgan said others in a Sunday tweet. According to him, Coinbase has a reasonably arguable fair notice defense in relation to Bitcoin and Ethereum trading.
Notably, the SEC started indicating that ETH was a security only since the merge last September when the Ethereum blockchain transitioned from PoW to PoS. “Coinbase will rely on such evidence to argue a Fair Notice defense for at least Ethereum and Bitcoin,” Morgan remarked. A pro-XRP lawyer noted the same in an earlier report.
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