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  • Coinbase officially sued the SEC and FDIC for trying to keep crypto out of the banking sector
  • Coinbase cites dismissal verdict of Binance to point out contrasts in judgment
  • Governments want to regulate how Coinbase works while their money lies there
  • Meanwhile, Hong Kong makes big moves to attract more crypto funds
  • The government of Germany makes different moves than the US: moves more than 3,000 BTC to exchanges
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Coinbase
Coinbase is not happy about the different regulations. Social media photo

Coinbase officially sued the SEC and FDIC for trying to keep crypto out of the banking sector

Cryptocurrency industry companies and leaders often discuss the lack of regulations needed for their benefit and the government's and other agencies' intervention in the industry. Agencies often seek regulations that do the opposite for cryptocurrency investors and customers; some are unhappy.

In a bold move, Coinbase, a leading cryptocurrency exchange, has taken legal action against the Securities and Exchange Commission (SEC) and the Federal Deposit Insurance Corporation (FDIC). The company alleges these agencies are deliberately trying to exclude digital currencies from the traditional banking framework.

The official filing reads: "For nearly two years, a wide array of federal financial regulators — including the Securities and Exchange Commission, the FDIC, and the Federal Reserve Board — have used every regulatory tool at their disposal to try to cripple the digital-asset industry… This FOIA lawsuit seeks to bring to light the FDIC’s role in that unlawful scheme."

Coinbase claims that these regulators have not followed the Freedom of Information Act (FOIA) and is asking a U.S. District Court to make them comply. In their official filing, Coinbase states that federal financial regulators like the SEC, FDIC, and Federal Reserve Board have used their power to harm the digital asset industry for almost two years. This lawsuit aims to reveal the FDIC’s role in this alleged scheme[1].

Paul Grewal, Coinbase's Chief Legal Officer, announced the lawsuit on social media, expressing Coinbase’s frustrations. He stated that financial regulators are using various tools to try to damage the digital asset industry. The SEC claims broad authority but provides no clear or consistent rules, while the FDIC pressures banks to sever ties with the industry.

History Associates Inc. represents Coinbase and filed FOIA requests seeking information about how the SEC views Ethereum, particularly its shift to a proof-of-stake system. However, the SEC denied these requests and subsequent appeals[2].

Coinbase cites dismissal verdict of Binance to point out contrasts in judgment

Coinbase’s core argument is that the SEC’s refusal to release requested documents violates the Freedom of Information Act and obstructs the company’s understanding of regulatory actions affecting the industry. Grewal emphasized the need for transparent and fair regulation, urging both the SEC and FDIC to improve their conduct and regulatory clarity.

The SEC and FDIC have yet to respond publicly to the lawsuit, but the court's decision on the FOIA requests could have significant implications.

Last week, Judge Jackson ruled in the SEC vs Binance case. The verdict stated that Binance 's BNB token sales in secondary markets do not meet the definition of securities. The decision contrasts with the previous rulings, and it triggered Cpinbase to react and question these different treatments of exchanges under regulatory rules by different judges.

As P. Grewal pointed out, Coinbase thinks there is a gap in how US district courts interpret crypto transactions, which influenced the lawsuit. Similar transactions often get different rulings when determining whether they qualify as securities[3].

This year, in April, Coinbase requested Judge Faila to halt the SEC lawsuit proceedings and wanted to appeal. The company cited these differences in opinions on crypto transactions in secondary markets. Coinbase mentioned the Ripple vs. SEC case, in which Judge Torres determined that XRP sales in secondary markets do not satisfy the Howey Test.

Coinbase claimed that this conflicting judicial stance creates uncertainty about the legal framework governing cryptocurrencies. The SEC responded to Coinbase's official motion by stating that no court adopted Ripple's interpretation of applying the Howey Test to secondary market sales.

The exchange gets some fire from agencies that want to regulate the crypto industry. Social media
The exchange gets some fire from agencies that want to regulate the crypto industry. Social media

Governments want to regulate how Coinbase works while their money lies there

While agencies like the SEC try to implement more regulations to control the cryptocurrency industry and keep the sector from influencing the country's economy, the US government moves money to Coinbase itself[4]. Recently, reports stated that the government moved over 240 million dollars worth of seized Bitcoin to the exchange platform.

These 3.940 Bitcoins moved to the Coinbase Prime platform, an institutional trading platform. This became public knowledge after blockchain analytics from Arkham Intelligence flagged the transaction. These funds were originally confiscated from convicted drug trafficker Banmeet Singh earlier this year. He was arrested in London back in 2019 on distribution charges and extradited to the US in 2023.

US authorities got around 8,100 Bitcoin from him as a part of his conviction. The recent transfer to Coinbase is almost 4,000 Bitcoin and represents a fraction of the total Bitcoin holdings that US government has. These funds in the hands of the government mainly come from seizures related to the shuttered dark web marketplace Silk Road and Bitfinex hack in 2016.

What does this transfer mean? The government wants to control the industry and regulate transactions and the way these companies and exchanges work, but the main purpose of this transfer of funds to Coinbase is that the government might be looking to sell some of these reserves, too. In the marketplace, that is often scalded for interfering with the country's traditional economics.

Meanwhile, Hong Kong makes big moves to attract more crypto funds

The US government wants a piece of this thing that they want to shut down so much. The amount the government has moved so far is not as big as the regular trading volumes of Bitcoin and other cryptocurrencies. However, the US government has way more crypto from these seized funds. It might be worth billions since Bitcoin prices shoot up every day.

The crypto industry in other countries looks a bit different, while US agencies seek control over such digital transactions. Hong Kong is taking big steps to become a leader in cryptocurrency and security token offerings (STOs). The city's comprehensive approach to crypto regulation is gaining attention from industry leaders and regulatory bodies[5].

By offering a competitive regulatory environment, Hong Kong aims to attract crypto businesses and talented fintech professionals, potentially changing the global digital asset landscape. Hong Kong's regulatory framework is inclusive, allowing the trading of both cryptocurrencies and security tokens under a single license.

This contrasts with the U.S., where Coinbase can only handle cryptocurrency transactions. Lu Tingkuang from HKbitEX points out that Hong Kong’s approach is more flexible and forward-thinking. The city is also committed to financial innovation.

In 2023, Hong Kong issued the world’s first tokenized green bond by a government, raising HK$800 million. This was followed by another digital green bond issuance in 2024, raising around HK$6 billion in various currencies. Private companies are joining in, with firms like Taiji Capital and GF Securities (Hong Kong) launching tokenized real estate funds and commercial paper.

Governments around the world embrace the crypto industry, but not the US. Pixabay/ Pexels
Governments around the world embrace the crypto industry, but not the US. Pixabay/ Pexels

The government of Germany makes different moves than the US: moves more than 3,000 BTC to exchanges

Other places in the world show that while the US government is fighting over the control of the crypto industry and crypto investors point out differences in opinions on digital transactions and even judgments of cryptocurrency fraudsters; countries work with the crypto industry for the better. Argentina has elected a president who is pro-Bitcoin and tries to change the country's economy by embracing the cryptocurrency industry.

Germany is another country that is proactive about cryptocurrency. The government transferred 282 Bitcoins, worth around 18 million dollars, to major exchanges like Kraken, Bitstamp, and Coinbase. This step is a part of the broader management strategy that highlights robust engagement with digital assets amidst evolving market landscapes.

This information is taken from another Arkham Intelligence report. A recent transfer from Germany shows that out of 282 Bitcoins moved to exchanges, 32.74 Bitcoins (worth $2.04 million) went to Kraken, 150 Bitcoins ($9.36 million) were sent to Bitstamp, and 100 Bitcoins ($6.24 million) went to Coinbase[6].

The German government has transferred more than 3,000 Bitcoins to exchanges over the past two weeks. Germany holds a large amount of Bitcoin, currently around 43,359 BTC, valued at about $2.72 billion. 400 Bitcoins ($25.3 million) were already sent to major exchanges Bitstamp, Coinbase, and Kraken. What's particularly impressive is the speed of these transactions. On June 25 alone, 900 Bitcoins, worth $54 million, were quickly transferred to Coinbase and Kraken in just 20 minutes.

It seems that Europe has a very different view on cryptocurrency and acts differently, embracing the positive effects on the economy that digital assets can provide while the US still focuses on regulations and taking control over everything. It does not seem to work in favor of the government or the country as of yet, however.