- Coinbase CLO Paul Grewal criticizes the SEC for blocking FTX’s crypto repayment plan
- The SEC’s stance raises concerns about regulatory clarity in the crypto market
- The ongoing tussle between Coinbase and the SEC could set important precedents for future U.S. crypto regulations
The tug-of-war between Coinbase and the U.S. SEC reached another level when Coinbase’s Chief Legal Officer, Paul Grewal, lashed out at the current decision of the SEC regarding the repayment plan of FTX after declaring bankruptcy.
Recently, the SEC threatened FTX not to repay creditors in stablecoins or other digital assets, raising more regulatory debates on clarity in the crypto market. Grewal’s comments reflect growing frustration in the crypto community over the approach taken by regulators like the SEC to digital assets.
Coinbase CLO Slams US SEC for Halting FTX on Crypto Repayments
Coinbase CLO Paul Grewal argued that the U.S. SEC carved out rights on the FTX repayment plan when regulators couldn’t keep clarity in place. The SEC warned FTX against returning money to creditors with either stablecoin or other forms of crypto.
The Commission objected to the provision, as it would insulate FTX from possible future lawsuits from creditors. Paul Grewal criticized the Commission’s stand and said the agency was continuing to introduce confusion into the rules for crypto.
In the latest filing, the U.S. Securities and Exchange Commission threatened the defunct crypto exchange FTX not to make any repayments to the victims in stablecoins or some other crypto assets. To that, Paul Grewal, Chief Legal Officer (CLO) of Coinbase, attacked the U.S. SEC for this, saying that this regulator evinces keen interest in maintaining uncertainty over crypto rules.
Coinbase CLO Slams the Regulatory Agency
Moreover, Coinbase’s CLO criticized the regulatory agency for its stand regarding the FTX bankruptcy plan. He further outlined that the refusal of the agency to shed light on whether the involved transactions are lawful or not. Commenting on the regulator’s stance claiming rights to reserve the crypto transactions, Grewal said why the U.S. SEC chose to issue threats instead of giving guidance. He emphasized, “Investors, consumers, and markets deserve better. Way better.”
FTX, on the other hand, has been working on a repayment plan for the victims as part of the bankruptcy settlement. In light of the decision, some creditors had also sought an in-kind distribution—meaning repayment in crypto against the crypto holdings instead of cash. Indeed, some of the bankrupt crypto lenders, including Genesis and BlockFi, had successfully pulled it off.
However, FTX has chosen to repay the creditors in cash or USD-pegged stablecoins. In the new filing, the U.S. SEC warned the exchange that it reserved the right to contest the legality of repaying the claims or profiting from its “crypto-asset securities” holdings.
Coinbase CLO Paul Grewal and many more lambasted the SEC for trying to keep crypto overreach while being misplaced and murky about the same. Interestingly, the U.S. SEC also probes Ethereum’s security status despite the ETF approval.
U.S. SEC Opposes FTX Repayment Plans
Besides that, the agency’s filing emphasizes that the plan doesn’t make it clear who would be behind the issuance of the stablecoins if the regulator agreed to such a plan. While keeping up their denial of clarity on these issues, the U.S. SEC didn’t clearly state that such a plan would be illicit.
It said: “The SEC is not opining as to the legality, under the federal securities laws, of the transactions outlined in the Plan,” adding that the agency “reserves its rights to challenge transactions involving crypto assets.”
It was not just the U.S. Trustee, but the SEC also voiced its opposition to the ‘discharge’ provision that protects the FTX debtors from any eventual lawsuits by creditors. The U.S. Trustee asked the court to deny confirmation of the plan.
Conclusion
The tussle between Coinbase and the SEC reflects the greater struggle for clarity and equity in crypto regulation. The objections of the SEC to the repayment plan of FTX, while the firm negotiates its bankruptcy, are indicative of the often contentious, complicated relationship that exists between regulators and the crypto industry.
With stakeholders like Paul Grewal calling out for clearer guidelines, this could lead to setting vital precedents for what lies ahead regarding future U.S. cryptocurrency regulation.
