Coming from uh sccn coinbase, one of the biggest players in the crypto game, as we heard from brian armstrong, the ceo of coinbase, calling the sec sketchy and saying that it expects to be sued over its uh coming lend platform. The way that uh customers would be able to earn yield using their crypto assets, of course, its a common practice that a lot of firms out there, including block fi and other players in the space. But it raises new questions about how strict the sec is going to be, and particularly why it wants to use litigation as regulation here and for more on all that i want to bring on caitlyn long, the founder and ceo of avonte bank. She joins us now here and caitlin. I mean youre an expert in kind of digging through all the nuance and the noise here, weve discussed kind of the secs changing position exactly and what its going to deem a security and not here, but but just first. Your reaction to. I guess the way that coinbase really laid this out in a big blog post, saying: look. We tried to be friendly with the sec and bring them this and now were expecting to get sued. Well, uh, oh boy, uh coinbase has the opportunity to avoid a lawsuit. So, unlike others that probably do have a lawsuit coming from the sec, this is this is how the sec regulates. They will pick a an example and um you know: try to move the whole market by picking an example.

Whats interesting and frustrating to us in the industry is, is that the industry has collectively been asking the sec for clarity on some of these very issues. For years, in some cases, more than five years, which is typically the statute of limitations for bringing a securities enforcement action – and now just now were seeing this – why are we seeing this – i guess youd say better late than never but boy, a lot of time passed And a lot of companies that probably were issuing unregistered securities were able to make a lot of profits and build up big war chests to fight the sec. Its such an interesting turn of events, its an interesting turn of events, and it raises a lot of questions to your point about what exactly they might want to really laser in on here, because it sounds like even in the tweet storm. From brian armstrong i mean there are other companies that offer interest on crypto assets, and they said there was some confusion around what was the security and the sec didnt want to tell him what a security which piece of this was the problem, but i mean you Know to your point, youve heard gary gensler kind of punt on the idea of what is and what isnt thinking that were all on the same page. Clearly not. But if thats the problem that raises some bigger questions about all those other kind of altcoins out there and id be curious to see.

I guess your reaction to maybe that being the issue here, if thats, really what theyre deeming to be the security issue around coinbases lend well, it sure does raise the issue, and some of us have thought that some of these lending products have been unregistered securities. All along and have been surprised that the sec hasnt taken action previously. The challenge is, though, that the sec does take its time. Uh in the in the ripple lawsuit the sec got several tolling agreements to whats called toll the statute of limitations, which is an agreement with the party that they might sue, that the statute of limitations, doesnt, apply and then, and then literally. I believe it was eight years after the initial offering of xrp was when the sec finally sued and thats, not really fair to those who are involved. A lot of folks look at the fact that um activities have taken place and presumed that there that the sec is okay with it, and this is definitely an issue for the for for the sec and the industry as a whole. Why does it take so long to bring enforcement actions and – and i i was on twitter, having a conversation with a cornell law professor today about the question of why the sec didnt raise this issue before coinbases ipo last fall. There were certainly a lot of disclosures about the potential that the fcc could consider some of the crypto assets that trade on coinbase to be on registered securities.

But you would have thought before a big public ipo goes forward from an investor protection perspective, which is exactly what the secs mandate is that it would have been better to deal with these issues last fall rather than let the ipo go forward and then raise the Issue and have the stock price get hit yeah, because now youve got retail investors who are watching a three percent drop today, saying hey what the heck. Why couldnt? I got that before, but also the exact point is it? Is it more obviously, if its, if its, that you know some of these coins, and you can pick one at random and say all right, thats, a security, so theres a big issue for you? That would be a larger issue than just kind of lending, because lending is just a small subset of coinbases business here, hasnt even launched uh, so i mean uh. How do you see that maybe going do you see it being a trickle down effect to the rest of the platforms? There may be the ones that arent even doing lending well again, weve seen that with the sec, where they will pick one or two um sort of you know problem children if you will typically its cases that are easy for them to win in court and uh And thats how they move the market from an enforcement action perspective, it is selective and, as brian armstrong correctly said, in his tweetstorm, it does feel like theres uneven application of the law.

It would be better if the sec actually came out with some clearer guard posts. Uh guardrails, rather, which is exactly what the industrys been asking for, whats, so fascinating about the gensler sec, is that gensler. During his confirmation hearing, told congress, we need clarification from you in congress. Now we are what nine months into the biden administration several months into genslers, post confirmation tenure and congress hasnt acted doesnt appear that it will and therefore youre, seeing the sec step up and uh start to try to fill the void. There is also, of course, a lot of jockeying happening between the different regulators in washington dc, as there always is between the sec, the cftc and then the the trio of bank regulators, the fed the occ and the fdic whos got jurisdiction over crypto is a fight That theyre all having right now, okay and caitlin, though, is there an unrealistic expectation on the timeline i mean were nine months into the biden administration, but gary gensler was only confirmed in april. So while the uncertainty exists right now, is this kind of questioning, ultimately a good thing for the space um, because it actually creates these guardrails that youre talking about? I mean i wonder if this is really just about the frustration of the timeline that you just pointed to so much as it is about sec action and where regulation ultimately goes well its better late than never bring on the clarity. If were finally going to get clarity and again, this is one particular issue: this is the the crypto lending market uh to zachs point.

There are other issues as well uh that havent been clarified yet, but if were finally going to get the clarity that the industrys been asking for, so that the companies that really truly do want to comply with the law as opposed to skirt it can do so. Then great bring it on, i suppose, better late than never um. As the old saying goes, uh um, giving credit to a wharton professor uh from a twitter exchange uh the best time to plant a tree was 20 years ago, but the better time to do it. Uh, if you havent done that is today so uh, if indeed the sec is finally going to be bringing us some clarity. That is a good thing um, it does feel like it. You know – and it always by the way, feels like when the sec acts that that it is uneven because they do typically uh go after the low hanging fruit, and here this was a product that hadnt even been launched. Yet to your point, uh and – and they made the uh and they and they drew the line uh. But it does feel like uh. If you take brian armstrongs word for it, that they were engaging with the sec for six months and then all of a sudden. The door slammed shut um again, you know those of us in the industry. My company included, who are actively seeking regulatory permission before we do things, are, are having more trouble than those who are just ignoring the law going forward and assuming that eventually they will pay.

The regulatory piper and, frankly, the jokes on the ones that are trying to get regulatory approval right now, because that regulatory regulatory approval really hasnt been forthcoming. For those who are trying to go up, the middle of the fairway and those who are not acting in within the letter of the law are are are thriving right now, at least as of now. The real question is: is a big regulatory act about to fall? Uh and and the playing field will finally be leveled well well – have to see yeah. It seems like that is uh at least uh. What were hearing here with this one and to your point theres a lot of other platforms that were planning to go even farther or already have gone far than what coinbase was planning here with issuing their own tokens around the lending platform as well. This kind of seemed like a watered down version, but it is the one getting the attention. I guess thats what happens when youre the big boy on the playground, but caitlyn long of aunty, bank and trust founder and ceo appreciate it follow her on twitter.

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