CRYPTO Is Now A Security: What Does It Mean For You?!

It is on probably the Securities and Exchange Commission is gearing up to Take on coinbase in the next Never-ending lawsuit that will have Profound consequences for all of crypto As the markets swallowed last week's Fed Rate hike like a cement seasoned hand Grenade the SEC served Up dessert by Issuing coinbase with a Wells notice Signaling its intent to bring charges Against the biggest and best known U.S Exchange and in true SEC style the Agency didn't actually specify what Those charges might be although Paul Growell coinbase's Chief legal officer Gave some details in a subsequent blog Post quote today's Wells notice does not Provide a lot of information for us to Respond to the SEC staff told us they Have identified potential violations of Securities Law but little more We asked the SEC specifically to Identify which assets on our platforms They believe may be Securities and they Declined to do so We're going to sue you so get ready for Some whoop ass Brian oh okay Gary what For though not telling oh up yours baldy No up yours baldy side note is it a Coincidence that the SEC has fired this Opening Salvo in coinbase's direction Right at the point when in conjunction With the fed and other regulatory bodies It's also actively working to debunk the

Crypto industry in the United States Coinbase may be well resourced and it Would seem up for the fight but it's Going to find a long battle in a U.S Court a lot harder to fight if it can't Get access to banking services let's Hope its lawyers are up for being paid In crypto anyhow let's go back to that Phrase Paul used potential violations of Securities laws it's pretty open-ended But it does suggest that the SEC could Well be going after coinbase as part of Its wider Crusade against proof-of-stake Cryptocurrencies you'll doubtless recall That SEC chairman Gary Gensler suggested That proof-of-state cryptos could be Securities on the very day of ethereum's Merge last September Gary has doubled Down on this in recent weeks and the SEC Scored a significant Victory on this Front back in February when Kraken Agreed to stop offering its staking Services and pay a 30 million dollar Fine I imagine the sec's legal team has Already earmarked those funds for the Upcoming tussle with coinbase because Remember folks when the lawsuits start Flying the real winners are always the Lawyers and indeed the day after the Wells noticed news broke coinbase Announced via its help page that it Would be moving to unchain staking for a Number of assets meaning that customers Would quote earn rewards from the

Protocol not coinbase coinbase acts only As a service provider connecting you the Validators and the protocol so coinbase Is clearly starting to get its ducks in A row although crypto slate speculated That this may have been in the works for A while now quote it is unclear whether The actions are related to the Wells Notice that coinbase has received from Securities regulators statements from Coinbase today suggest that the changes Were scheduled as early as March the 10th prior to its receipt of that notice It is possible that the changes were Influenced by coinbase's February Warning that the U.S Securities and Exchange Commission SEC intends to take Action against retail staking products Now as you can no doubt imagine the news Of the sec's move against coinbase has Been received about as well as the press Release for Logan Paul's next nft Project the war against crypto in the United States is dragging more and more Entities into the Maelstrom and the SEC Clearly isn't afraid of going after the Big players so one inevitable question Is who's next will ethereum be in the Crosshairs once Shanghai goes live next Month an unstaking becomes possible or Will Gary and Co choose to go after Another proof of stake crypto instead However today I want to ask another Question one that I'm sure a few of you

May have been wondering yourselves what If the SEC is successful in its Arguments that most cryptos beside Bitcoin are securities what if it wins Its case against Ripple and gets the Wind in its sales to go after other Altcoins let's put aside questions Around proof of stake for the time being Xrp isn't proof of State crypto remember And instead assume that the SEC is able To successfully argue that the Expectation of profit from investing in Altcoins comes from the efforts of Identifiable third parties what happens Then would it be the end of days for Crypto in the USA or are we getting our Panties in a Twist over a great big Nothing Burger so with the help of Kevin One of our research team here at Coinbiro I decided to find out So let's assume the worst has happened Gary's got his way and an altcoin has Been officially designated as a security Now I suppose I could use a particular Crypto as an example here but I know That if I do then that particular coin Or tokens Community will get all upset And accuse me of fudding their beloved Project and basically being well the Devil incarnate and life really is too Short so let's create a fictional crypto By way of an example let's call it guy Coin ticker GUI and say it's issued by Guy Technologies a for-profit company

Based in the US and its development is Overseen by the guy Foundation a Non-profit based in Switzerland okay Guy Technologies loses its Court battle With the SEC guy is designated a Security and so guy Technologies is on The hook for selling it as an Unregistered security what happens next Well three sets of stakeholders are Directly impacted the issuer guide Technologies the exchanges selling the Coin those based in the US that is and Those people who bought guy coin now you Might imagine that the first thing that Would happen would be guycoin being Delisted from all U.S exchanges though As we saw when the SEC sued Ripple back In 2020 xrp was delisted right away It has subsequently been relisted by Some but it's still not nearly as Accessible to us-based investors as it Once was we can assume that in this Example guy coin has already been Delisted and is not available to our Friends in the land of the free Obviously guy coin's price has been damn Bad ever since and will likely have Taken another beating on the sec's win Against guy Technologies so as you can Imagine guide Technology's first order Of business is to raid the piggy bank to Pay an absolutely eye-watering fine to The SEC for selling guy coin as an Unregistered security as in tens maybe

Even hundreds of millions of dollars but The pain doesn't end there guide Technologies will now have to make a Choice except that guy coin cannot be Sold to U.S investors continue selling It as an unregistered security or jump Through the necessary Hoops to make it Available as a registered security Instead it's a tough call Obviously option one is not ideal the US Is the world's largest market for Cryptocurrencies and so being cut off From that market is going to choke off a Big big source of funding Sure the world is a lot bigger than just The United States but maybe not big Enough especially when it comes to Crypto well yet option two isn't great Either unregistered Securities are Subject to strict limitations on whom They can be sold to typically it's only So-called accredited investors who are Able to buy unregistered Securities that Is rich people and institutions That cuts out regular retail investors Although that may not be an issue if guy Technologies feels it can survive from Selling guy to a smaller pool of Rich Folks but would those Rich folks be so Willing to buy an asset that probably Wouldn't have a particularly liquid Market and was tainted by the publicity Surrounding the court case Etc it's not As much fun for accredited investors if

They can't dump their coins on retail Just before the price crashes now is it There can also be limits imposed on how Much Capital can be raised via the Selling of unregistered Securities so Again not ideal So registered security it is then but This involves enough paperwork to turn Worm Hogg into a ftse 100 company that's Done to Mifflin and the S P 500 if You're an American if you don't get the Reference you sure have a lot of great TV to catch up on okay Selling registered Securities doesn't Come with anything like the same Restrictions as unregistered ones but Boy does that freedom have to be earned The SEC will demand documentation in Droves token subscription agreements Disclosures proof of compliance with kyc And AML procedures company information Information on the asset itself copies Of publicity and other investor-facing Materials Articles of Incorporation Contracts underwriting information and So on and so on in other words the sort Of paperwork that makes filing your tax Return seem as straightforward as Opening your phone with your face Expensive time-consuming labor-intensive Paperwork that better all be in order or Guide technologies will be writing the SEC more checks before they know it so That's what will be required of the

Issuer how about those exchanges though Yep you guessed it more paperwork Unsurprisingly issuing Securities is a Pain in the backside and so too is Selling them assuming guy Technologies Registers guy coin as a security the Baton of paperwork Payne will then get Passed on to any exchange wanting to Sell it so let's say coinbase decides to Forge ahead in order to sell Securities It will have to apply for a broker Dealer license or similar Capital Markets license for whichever Jurisdiction it wants to operate under Regulatory jurisdictions in the US Include our friend the SEC the financial Industry regulatory Authority finra and The regulator in every single state side Note this is why U.S exchanges like Coinbase Kraken and Gemini are often at Pains to point out how many licenses They hold just to operate as they do in The United States and that's a big part Of why their trading fees tend to be Higher than those of non-us exchanges They have to collectively spend tens of Millions of dollars a year just making Sure they have the right pieces of paper And lots of pieces of paper at that now These extra licenses an exchange would Need to sell guycoin as a security do Not come cheap and the process of Registering and applying for them will Again be tedious lengthy and costly

Reams of information about The Exchange Its products ownership structure Personnel finances risk management Processes rules and procedures and on And on and on until the will to live Disappears completely there would be yet More regulatory oversight involved and Countless Hoops of compliance through Which to jump but no license no dice so The exchange is then left with a Question is Guy coin now classified as a Security like likely to generate enough Interest and therefore trading fees to Make it worth the hassle and expense of Applying for and maintaining all those Additional licenses the answer is that Guy coin on its own probably isn't if However more cryptos are likely to be Labeled as Securities in the wake of guy Coin then the case for getting the Paperwork done becomes stronger and of Course if one exchange decides to pull The trigger its Rivals are going to have To consider doing so as well for fear of Getting left behind and handing their Competitors an advantage which brings us To the final set of stakeholders Impacted by Guy coin security Designation the good old guy coin Hodlers themselves the guy Brigade guy Grenadiers whatever they've called Themselves what does all this mean for Them well guys de-listing from U.S Exchanges will have already devalued

Their stack and so anyone who bought Before the SEC came a knock-in will have Already suffered a fair bit they will Have to hope that some U.S exchange Bites the bullet and applies for those Securities licenses but even if that Happens it could be a while before those Licenses get issued but wait the SEC is All about protecting investors right it Is on the side of the average Joe the Chap who bought a bit of guy coin way Back when and and just wants to make a Bit back on his investment We'll see here's the kicker even some Registered Securities such as mutual Funds and ETFs can on occasion be Subject to limitations on who can invest In them yep we're back to accredited Investors again those folks who are rich Enough to be allowed to further enrich Themselves because we can't have any old Tom Dick or Harriet making a bit of Extra money from Risky Investments now Can we they aren't nearly wealthy enough To make wise investment decisions or Entrust their money to someone like that Nice Mr Madoff to invest it for them Let's just keep them out of the Playground all together for their own Protection now this isn't to say that The sale of guy coin would necessarily Be restricted to accredited investors Where it deemed a security but given all That we've seen of the sec's attitude

Towards crypto over the last few years Would you rule it out if you would You're way more of an optimist than I am That's for sure okay let's start summing Things job if a crypto asset were to be Deemed a security in the United States The upshot would be in the short term at Any rate a lot of pain For the issuer pain for the exchanges And pain for investors however that's Not to say that it would be the end of The line especially if as is likely more And more cryptos fall into the Securities bucket as a result of the Precedent that has now been set There is strength in numbers after all And as issuers and exchanges plow Through the paperwork perhaps we could Get closer to a world where crypto is Able to exist under the watchful eye of The SEC and the ludicrous system of Regulation by enforcement that we're Seeing today could become a thing of the Past assuming investor protection isn't Taken too far and assuming some sensible Pro-crypto regulations do eventually get Passed in the United States then it's Not impossible to imagine a future where Crypto is allowed to exist and evolve in A way that's agreeable to most parties It's not all sunshine and Roses of Course smaller crypto projects and Exchanges could find it even harder to Survive and thrive when it becomes

Necessary to devote sizable chunks of Their workforces to merely staying Compliant It's also hard to see how Decentralization is possible in such an Environment If Gary Gensler succeeds in his quest to Regulate crypto to his liking then There's a real danger it could end up as Just another arm of the existing Financial system No thanks all of which just goes to Underscore how consequential the times We're living in are what happens with The SEC versus Ripple and the SEC versus Coinbase and the SEC versus whoever else Gary has his death ray pointed at it's All going to have far-reaching Consequences for crypto Perhaps coinbase will prove a bridge too Far for the SEC or perhaps the agency is Only just getting started But for the wider crypto industry Particularly those projects out there Building away like mad forewarned is Forearmed and the best weapon to have in Your Armory is decentralization ethereum Will ultimately survive even if the SEC Goes after it because it has made Efforts to decentralize over time Bitcoin well it's Bitcoin every other Crypto out there won't be safe though Until it has decentralized sufficiently To make it impossible to prove where any

Expectation of profit is coming from Some won't and they may not survive now With luck what we'll end up with is a Crypto industry where only the best and Most decentralized projects survive and Where all the crap never gets a chance To rise to the surface We are a long way from that point right Now but we're going to have to try and Get there ASAP because the alternative Is not a place we want to end up in