Only recently was an ex Coinbase-Employee arrested on suspicion of insider trading. Now the US financial regulator SEC is to investigate the crypto exchange. The accusation: sale of unregistered securities.
Paul Grewal, General Counsel Coinbase, denied the allegations and stated: “We are confident that our stringent due diligence process – a process that the SEC has already reviewed – keeps securities off our platform.”
Appropriate for the current debate: There is still a dispute in the USA as to which coins and crypto tokens should be treated as commodities or securities.
The rating of Crypto-assets before listing
In one interview With podcaster Lex Fridman, Coinbase boss Brian Armstrong now describes how cryptocurrencies are checked and evaluated before listing.
We basically have a legality check. We check: “Do we think this is a security?” If so, it cannot be listed on Coinbase. And for that we go through a very strict process. With the current laws in the United States, that’s not possible. We have obtained a broker dealer license from the SEC. We’re trying to work with them to get this operational and hopefully one day we can trade real crypto, but today that’s not possible in the US.
Coinbase CEO Brian Armstrong
The 39-year-old also addresses the issue of security and explains: “Then we look at the cyber security of the crypto asset. Do we think there is a bug in the smart contract or that someone could tamper with it without the customer’s permission?”
The CEO likens the process to online shopping star rating: “It’s like Amazon or something where a product might have three stars or five stars, but if it starts getting one star consistently, it’s probably fraudulent or broken or something and maybe amazon will remove it. Otherwise you want to let the market decide what those things are,” he elaborates.
Enable innovation, uncover fraud
When asked about scams or scams, Armstrong explained a few “red flags” that would be particularly watched out for. For example, check the founders of the respective cryptocurrency and take a close look at the tokenomics. At the same time, make sure that none of the insiders own too much of the coins or tokens in circulation.
“We want to enable innovation in this area, but not allow anyone to slow down the progress of this industry by doing fraudulent things,” explains Armstrong.