The firm’s new futures commission merchant status at the CFTC may undermine the other U.S. markets regulator – the SEC – and bolster the case for ether as a commodity.
Coinbase Inc. is the first crypto firm to get the gold-standard registration as a futures commission merchant, even as it remains in a legal battle for its life.
And because the U.S. regulator of commodities markets is effectively saying Coinbase can do business in bitcoin and ether contracts, that permission could reinforce industry arguments that ether belongs in the commodities bucket – meaning it could face a less onerous U.S. regulatory regime. Ether fans are likely to welcome such news if it signals the SEC may not have a say in their asset.
“It's not an easy registration to get,” said Davis, who is now co-chair of the financial-markets practice at Katten Muchin Rosenman. “It's significant to get a registration like this,” he said, because a firm has to demonstrate strong systems for capital, disclosures, record keeping and segregating customer funds.
“You really see the branching paths that the CFTC has taken versus the SEC,” said Justin Slaughter, who has worked at both agencies and is now the policy director at Paradigm, which has an investment stake in Coinbase. The CFTC focused on getting a major crypto player registered, he said, while the SEC “is going to court to sue everybody.
Still, crypto skeptics in Congress and consumer groups welcome SEC scrutiny on the industry. Todd Phillips, a former government lawyer and consumer advocate who teaches at Georgia State University, said the CFTC allowing major crypto exchange Coinbase to also be an FCM is illustrating a danger common across the industry.
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