North America’s largest cryptocurrency exchange Coinbase is in talks with the Securities and Exchange Commission (SEC) to register as a licensed brokerage according to a report in the Wall Street Journal citing anonymous sources.
Approval by the SEC will make Coinbase the first SEC-registered cryptocurrency exchange within the United States. SEC oversight has largely taken a passive role when regulating cryptocurrency exchanges. As an example, Gemini, is regulated by the New York State Department of Financial Services. Additionally, fellow US Based Exchange Kraken states that it is “trusted” by the Tokyo government’s court-appointed trustee and Germany’s BaFin regulated Fidor Bank on its website.
Why Does Coinbase Want Regulation?
The SEC stepped up its efforts to bring cryptocurrency markets under regulatory scrutiny last year due to the popularity of Initial Coin Offerings (ICOs). SEC chairman Jay Clayton repeatedly warned about the legal status of ICO tokens. According to him, most ICO tokens were securities and, therefore, were subject to SEC regulations. Recently, the agency released a definition of the conditions that would require an exchange to register with the agency.
Coinbase’s move follows its announcement last month of support for ERC20 tokens, the most commonly-used ethereum token used for ICOs. The exchange is also planning to increase the number of tokens listed on its platform. As are other exchanges. Gemini and Kraken are also making the addition of new coins a priority. A Bloomberg report states bitcoin offshoots bitcoin cash and litecoin will be the most likely additions.
The addition of new coins is a profitable business for exchanges as it translates to increases in trading volume. According to Bloomberg, exchanges earn as much as $3 million per day in trading fees. Dave Weisberger, chief executive of CoinRoutes, said that “…providing such (crypto) markets with the opportunity (and obligation) to comply with principles-based regulatory approach would likely increase investor confidence and institutional participation in the market.”
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