19th April 2023 - Coinbase and the UK.

tl;dr

Coinbase’s threat to move overseas might just kick start the crypto revolution in the UK.

Market Snap

Market Wrap

A brief dip to $29.2k, followed by regaining the 30-handle and a drop to $29.2k in just the last half an hour suggests that volatility is back with a vengeance. Stocks moved in the same direction but not with the same amplitude.

Large price moves, in one direction or the other, are often preceded by increased volatility so the question is this – are we about to see one of the greatest buying opportunities of all time?

Curious Cryptos’ Commentary – Coinbase

Brian Armstrong, CEO of Coinbase, has been a vocal critic of the SEC (Securities and Exchange Commission) and its Chair, Gary Gensler.

Brian’s gripe – with some justification – is that the regulations around the crypto industry do not provide enough clarity. Given Coinbase’s position as a public limited company, with audited quarterly and annual reports, and undoubtedly a large team of compliance officers, Brian’s views must necessarily carry some weight.

He has claimed that despite some 30+ meetings with the SEC over the last year, the recent issuance of a Wells Notice – often a precursor to enforcement action – to Coinbase was an unexpected and disappointing surprise. The notice specifically states the Coinbase has violated federal securities laws, but with little specific information on the violations themselves.

As a leading provider of crypto services in the US, it would make more sense for the SEC to work closely with Coinbase to ensure full compliance, to demonstrate to the rest of the industry that though standards may be exacting, and rightly so, they are achievable in practice. I maintain that arguing publicly with one of your biggest customers is never a good look.

Brian is unhappy:

“I think we’re going to have to actually end up going to court to get the clarity we need and create the case law”.

As we have seen with Ripple, years’ long litigation merely obfuscates matters, and helps no-one in the interim.

…

Brian makes a second very important point, one that lawmakers must take notice of:

“This is the reason why we need clarity about legislation and regulation onshore because if the UK doesn’t have this, if the US doesn’t have this, these firms are going to be built in offshore havens.”

The fraudulent fiasco at FTX is ample proof that lax regulation in some parts of the world is both an impediment to the crypto industry, and dangerous for investors.

Brian then surprised me with this comment on Twitter:

“Great meeting today with UK Economic Secretary and City Minister @griffitha.

The UK is moving fast on sensible crypto regulation to both drive economic growth AND consumer protection. Excited to keep investing in the UK.”

Aside from banning the provision of leveraged products by Binance in the UK, products that weren’t even available to UK clients of Binance, I am not aware of any progress towards sensible crypto regulation in the UK.

If only that were the case, as Coinbase may look to move its tax dollar base elsewhere:

“I think in a number of years, if we don’t see that regulatory clarity emerge in the US, we may have to consider investing more elsewhere in the world.”

Curious Cryptos’ Commentary – The UK

Thanks for the heads up, Brian, because, just this morning, whilst researching my rambles above, I find that Andrew Griffith, economic secretary to the UK Treasury, is making bullish sounds about progress towards crypto specifical legislation in the UK:

“Wherever possible we want to see the same asset regulated in the same way, but there are some additional opportunities in the crypto asset or distributed ledger space and we want to take advantage of that.”

UK politicians and mandarins have frequently pontificated in this direction with little evidence of progress so far. I expect to remain disappointed going forward.

Andrew tries to explain why I might be wrong:

“I think over the next 12 or so months is the window. We’ve got this great asset in the U.K., we’ve got control back of a rule book — not something the U.K. has had for decades — so we’ve got the ability to move in an agile and proportionate way.”

Clearly a reference to Brexit, a topic which rankles people on both sides of the debate. Some Remainers still can’t accept the move away from the EU, and ardent Brexiteers – and I think we all know at least one of those – fervently believe we haven’t moved far enough away.

I make no comment on that debate, except for this one point.

The most ardent Brexiteer must concede that divergence for the sake of divergence is not an intellectually sustainable position.

I would suggest to Andrew that the UK should adopt wholesale the leading crypto regulation in the world MiCA (Markets in Capital Assets) created and being implemented by the EU.

Adopt it, implement it, improve it.

That’s the way for the UK to get ahead in attracting crypto tax dollars.