Robinhood Joins Coinbase in Saying It Tried to “Go In and Register” As Wanted by the SEC

With Coinbase (COIN) and Binance accused of arranging illegal exchanges by the U.S. Securities and Exchange Commission (SEC), the latest industry testimony in the U.S. House of Representatives this week revealed that businesses had desperately requested the agency’s help to register properly, but were turned away. far.

SEC Chairman Gary Gensler issued a crypto invitation to companies that operate without agency approval and oversight, something he’s repeated so often it’s become a messaging mantra: They don’t. just come in and register.

Robinhood Markets’ chief compliance attorney told lawmakers that the popular trading firm was trying to register as a specialty broker for digital assets. Dan Gallagher, a former SEC commissioner who spent a career in securities and corporate law, couldn’t get the agency to guide Robinhood toward crypto compliance, though he said that the staff seemed to want to help.

“When SEC Chairman Gensler in 2021 said, ‘Come on in and register,’ we did,” Gallagher said in his testimony. “We went through a 16 month process with SEC staff trying to register a special purpose broker. And then we were told quite summarily in March that this process was over and that we would not see any fruit from this effort.

His story echoes longstanding complaints from Coinbase, whose lead attorney was also present at the House Agriculture Committee on Tuesday and is now facing an SEC lawsuit alleging his company offered unregistered securities and did not gain approval as an exchange.

“When Coinbase attempted to do just that, to talk about how we could register as a broker or a [alternative trading system] or even as [national securities exchange] after months and months of discussion, we are simply dismissed with no response or counter-proposal or ideas from the SEC,” said Paul Grewal, chief legal officer of Coinbase.

Gallagher said one of the regulator’s final sticking points for Robinhood was the lack of registration and disclosures of token issuers who trade on the platform, and Gallagher argued that there was no no way for his company to insist that outside issuers meet SEC requirements.

Sen. Cynthia Lummnis (R-Wyo.) jumped into the debate with a tweet this week promoting its crypto bill: “The SEC has failed to provide a means for digital asset exchanges to register.”

The possible counterbalance to this argument is the series of approvals of digital asset brokers by the Financial Industry Regulatory Authority (FINRA), an industry-funded oversight arm created by the SEC. Brokerage firms, including Prometheum Ember Capital LLC, Bosonic Securities, and OTC Markets Group, are officially licensed to trade in crypto securities, an asset class whose boundaries are not yet well defined. Meanwhile, companies trying to make their way as compliant crypto companies have yet to demonstrate a fully formed business model.

In comments after his agency’s enforcement action, Gensler now appears to be suggesting that the US “doesn’t need more digital currency” and that the industry needs to fix its compliance issues or he foresees a possibility. that it “collapses like a house of cards”.

However, this compliance dispute is no longer in the hands of the industry or the SEC but will be decided by the courts.

“We have to go to court and really see, or this industry just won’t exist in the United States,” Coinbase CEO Brian Armstrong said in an interview with CNBC on Wednesday.

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