It turns out that popular cryptocurrency exchange Coinbase didn’t get SEC approval for the purchase of a company that may have allowed it to list securities. The news, which broke Monday, may well have attributed to the significant surge in the cryptocurrency market that occurred shortly after.
The news came on the heels of last weeks announcement by Coinbase that it intends to list four new cryptocurrencies – some of which may be deemed securities. That news alone caused a spike in overall prices, so the follow-up announcement by the U.S Securities and Exchange Commission (SEC) unsurprisingly ignited an even greater wave of fresh interest in the market.
Coinbase didn’t get SEC approval
However, Coinbase spokesperson Rachael Horwitz has now confirmed in a statement that Coinbase didn’t get SEC approval for the purchase and in fact, the SEC was not even involved in the approval process.
“It is not correct to say that the SEC and FINRA approved Coinbase’s purchase of Keystone because SEC was not involved in the approval process,” she said.
The purchase of Keystone Capital Corp is part of a wider acquisition of three companies that would potentially enable Coinbase to operate as a broker-dealer and in the future possibly deal in assets deemed as securities.
An SEC spokeswoman has also since confirmed that Coinbase didn’t get SEC approval for the purchase.
Horwitz goes on to explain that Coinbase only discussed the acquisition of Keystone with SEC members on an informal basis and their approval was not required.
“The SEC’s approval is not required for the change of control application,” Horwitz said
It appears Coinbase did, however, get approval from the Financial Industry Regulatory Authority (FINRA) for the purchase.
It is unclear whether Coinbase themselves announced the approval incorrectly or if media outlets incorrectly reported the news. Initial stories seem to have stated that FINRA had approved the purchase and that Coinbase had got the green light to move forward with a securities-related trade deal – but didn’t explicitly say the SEC had granted approval.
The big securities question
The question of exchange-traded funds (ETF)’s and whether the SEC deems certain digital assets as securities have been top trending news items lately in the crypto sphere. Approval by the commission would open the floodgates to a massive amount of institutional investment in the market, so speculators are understandably on high alert. Recent news regarding a decision to grant a bitcoin-based ETF and the resultant confusion regarding dates drew massive attention from the community.
In most cases, such mistakes could be regarded as miscommunication or simply erroneous reporting, but when they are potentially responsible for having a significant effect on markets, it raises concerns. Financial markets are heavily media-driven at the best of times, and a less well-regulated sector like cryptocurrency is even more-so effected than most.
Two days ago some investors no doubt started planning their next financial moves based on the news, only to find out today that Coinbase didn’t get SEC approval after all. Furthermore, incorrect claims by big players in the industry could delay or have a negative effect on an ultimate conclusion by regulatory bodies.
It will be interesting to see what the SEC’s opinion on the matter is.
Mark Hartley is an IT specialist, freelance writer, keen traveler, and blockchain enthusiast. He has worked on the trading floors of the world’s biggest interdealer broker in London and helped integrate crypto-services into IT trading systems. When he’s not searching for the world’s most beautiful beach, he’s nose deep in any crypto and blockchain related news.