- Self-custodial wallets win “victory” in lawsuit between Coinbase and SEC.
- The industry is still seeking greater regulatory clarity.
On March 27, U.S. District Judge Katherine Failla gave the green light to the SEC’s lawsuit against Coinbase to proceed, but dismissed the claims against Coinbase Wallet.
In it decisionJudge Failla dismissed the SEC’s alleged claim that Coinbase was an unregistered broker through its Coinbase Wallet.
The court noted that Coinbase had no control over the cryptocurrencies or users’ transactions in the wallet.
A win for self-custodial crypto wallets
Coinbase’s partial victory has been heralded across the industry, starting with Coinbase executives.
Acknowledging the judge’s decision, Paul Grewal, Coinbase’s chief legal officer, https://twitter.com/iampaulgrewal/status/1772993916146479193 that they were prepared for Coinbase Wallet’s alleged claims.
“Today, the Court decided that our SEC case will advance most of the claims, but dismissed the claims against Coinbase Wallet. “We were prepared for this and look forward to finding out more about the SEC’s internal views and debates on cryptocurrency regulation.”
Grewal added: “We also appreciate the Court’s understanding that technological innovations like Coinbase Wallet do not and cannot implicate US securities laws.”
Ripple also supported Coinbase’s partial legal victory. Ripple’s chief legal officer, Stuart Alderoty, https://twitter.com/s_alderoty/status/1773017299831648339 that,
“A quick strike would have been nice, but at the end of the day, the wheels of justice move slowly.”
He also added that the fight is “far from over.”
For his part, Brian Armstrong, CEO and co-founder of Coinbase, considered the decision a victory for self-custodial wallets;
“Great progress in the SEC case and a big win for self-custodial wallets.”
But the CEO added:
“We will continue to fight for your right to use cryptocurrency and to clarify the rules until the job is done.”
Coinbase VP of Product Max Branzburg reiterated Armstrong’s sentiment: https://twitter.com/brian_armstrong/status/1773015852503417100 the dismissal “a victory for the industry.”
Branzburg added that the measure could be a deterrent against “SEC overreach and self-custody protection in the United States.”
Self-custody wallets entrust full control to users, giving them their own private keys.
Compared to the recent update of the EU AMLR (Anti-Money Laundering Regulations), the regulation for self-custody wallets in the US could be considered “lenient.”
Peter Hansen, Director of Strategy and Policy at Circle EU, https://twitter.com/paddi_hansen/status/1771929879073771974 that the previous version of the AMLR was very strict.
Required originator/beneficiary KYC (Know Your Customer) for self-custodial wallets. But this has been moderated through a “risk-based approach”.
That said, regulatory clarity around self-custody wallets in the US is excellent, but the industry is also eager to see more clarity in other subdomains.
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