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Coinbase Already Compliant with SEC Proposal

Feb 21, 2023

Coinbase's CLO says that the proposed new rules from the SEC for custodians would not have any impact on the company's business model

Coinbase's Chief Legal Officer, Paul Grewal, recently argued that the proposed new rules from the SEC for custodians would not have any impact on the company's business model. The SEC aims to regulate crypto companies acting as qualified custodians for institutional funds, following recent failures by some crypto platforms to protect users' assets from cyberattacks and bankruptcy. The SEC has expressed concern that such reckless behaviour could destabilize the economy. However, some crypto platforms have downplayed the news, stating that they would need little or no adjustments to comply with the proposed regulation.


In a recent interview Coinbase CLO Paul Grewal stated that not only is Coinbase already compliant with the proposed changes to qualified custodian law, but it also sets the standard for other crypto platforms.


“I think that when it comes to Coinbase, we see SEC officials recognize that specifically, Coinbase is operating in a qualified manner. In a lot of ways, this is about bringing the rest of the industry to the standard Coinbase has set for itself.”


He applauded the SEC's initiative, but reminded the industry that nothing is set in stone yet. The proposed initiative would require crypto platforms to provide assurances that client assets are segregated from funds required for the platform's operation, ensuring the safety of funds in case the platform goes bankrupt. However, Coinbase has previously argued that the company operates differently from competing platforms, a statement reiterated by their CLO.


While Coinbase's more traditional business methods offer some protection, the company is not entirely safe from possible regulatory action by the SEC and others, particularly with regards to its support of USDC, given recent regulatory actions against stablecoins.

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