- Self-custodial wallets get a “win” in Coinbase vs SEC lawsuit.
- The industry still seeks wider regulatory clarity.
On the 27th of March, US District Judge Katherine Failla greenlighted the SEC’s lawsuit against Coinbase to proceed but dismissed claims against Coinbase Wallet.
In the decision, Judge 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 users’ crypto or transactions in the wallet.
A win for self-custodial crypto wallets
Coinbase’s partial win has been heralded across the industry, starting with Coinbase’s executives.
Acknowledging the judge’s decision, Paul Grewal, Coinbase’s chief legal officer, noted that they were ready for Coinbase Wallet’s alleged claims.
“Today, the Court decided that our SEC case will move forward on most of the claims, but dismissed the claims against Coinbase Wallet. We were prepared for this, and we look forward to uncovering more about the SEC’s internal views and discussions on crypto regulation.”
Grewal added, “We also appreciate the Court’s understanding that technology innovations like Coinbase Wallet do not and cannot implicate US securities laws.”
Ripple also supported Coinbase’s partial legal win. Ripple’s chief legal officer, Stuart Alderoty, noted that,
“A quick knock out punch 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.”
On his part, Brian Armstrong, CEO and co-founder of Coinbase, deemed the decision a win for self-custodial wallets;
“Great progress on the SEC case – and a huge win for self-custodial wallets.”
But the CEO added,
“We’ll continue fighting for your right to use crypto and to get clarity around the rules until the job is done.”
Coinbase’s vice president of product, Max Branzburg, reiterated Armstrong’s sentiment, calling the dismissal “a win for the industry.”
Branzburg added that the move could be a check against “SEC overreach and protecting self-custody in America.”
Self-custody wallets entrust full control to users, granting them their own private keys.
Compared to the recent EU AMLR (Anti Money Laundering Regulations) update, regulation for self-custody wallets in the US could be deemed “lenient.”
Peter Hansen, strategy and policy director for Circle EU, noted that the previous version of the AMLR was very strict.
It required a KYC (Know Your Customer) originator/beneficiary for self-custodial wallets. But this has been moderated through a “risk-based approach.”
That said, regulatory clarity on self-custody wallets in the US is great, but the industry is eager to see more clarity in other sub-domains, too.
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