Coinbase, the popular cryptocurrency exchange, is citing an interesting comparison in its defense against the Securities and Exchange Commission’s (SEC) lawsuit. In a recent legal filing, Coinbase draws a parallel between its platform’s secondary-market exchange and the sale of various collectibles, including Beanie Babies and baseball cards. By equating the crypto trading process to the sale of collectibles or real estate, Coinbase aims to dismiss the SEC’s claims that it unlawfully listed securities.
Coinbase’s legal filing also references a judge’s decision regarding Ripple, another cryptocurrency company currently embroiled in legal issues. The judge determined that Ripple’s tokens were considered securities upon issuance but not when traded on secondary markets. This decision has sparked controversy within the crypto community due to its contradictory nature.
In other news, PayPal has announced the launch of a fully reserved stablecoin called PayPal USD. The stablecoin will be issued by Paxos Trust Company, a licensed trust company regulated by the New York State Department of Financial Services. The reserves for PayPal USD will consist of U.S. dollar deposits, U.S. Treasuries, and similar cash equivalents. Paxos will publish monthly reserve reports outlining the composition of the reserves, accompanied by third-party attestations conducted by independent accounting firms.
Stablecoins, like PayPal USD, function similarly to money-market funds. However, they are currently regulated solely by the New York Department of Financial Services and not the SEC, despite the SEC’s authority over money-market funds. This regulatory discrepancy has raised concerns within the industry.
Considering the rising popularity of stablecoins, a bill aimed at regulating them has recently passed the US House Financial Services Committee. If enacted, it would be the first bill of its kind to reach the House floor. The bill proposes exempting permitted payment stablecoins from classification as securities under securities law.
These developments highlight the ongoing discussions and debates surrounding the regulation of cryptocurrencies and stablecoins. Financial authorities are grappling with the classification and oversight of these digital assets, shaping the landscape for the second half of the year in the world of financial regulation.
