Coinbase: We Didn’t Need SEC Approval to Acquire Broker Dealer Firms

On Monday of this week, Coinbase told Bloomberg that the United States SEC had given it the go-ahead to finalize the acquisition of three companies: Keystone Capital Corp., Venovate Marketplace Inc. and Digital Wealth LLC. The acquisitions are part of Coinbase’s plans to become a broker dealer and to sell coins that have been classified as securities.

Now, Coinbase is saying that not only did the SEC not give this endorsement, but also that Coinbase never needed the endorsement in the first place.

Time to buy the dip?

Coinbase’s Vice President of Communications, Rachael Horwitz, said in an email to Bloomberg on Tuesday that “it is not correct to say that the SEC and FINRA approved Coinbase’s purchase of Keystone because SEC was not involved in the approval process.”

Where Did the Confusion Come From?

Horwitz said that the confusion arose because “Coinbase has discussed aspects of its proposed operations, including the acquisition of the Keystone Entity, on an informal basis with several members of SEC staff.”

“The SEC’s approval is not required for the change of control application,” she explained.

At the time, Coinbase spokesman Elliott Suthers said in an emailed statement to Bloomberg that “being approved to take ownership of these licensed entities is one more step toward our ultimate goal of allowing our customers to trade securities tokens on our platform. There are many more steps and conversations needed with regulators before this journey’s complete.”

Plans for the Acquisition Were Announced Last Month

Coinbase originally announced plans to make the acquisitions in early June, an announcement that was nearly simultaneous with a statement from cryptocurrency platform Circle Internet Financial Ltd. that they would also be pursuing registration as a broker dealer and a federal banking license to provide a wider variety of services to customers.

At the time, Bloomberg reported that “If U.S. regulators approve, Coinbase will use licenses its obtains to offer customers blockchain-based securities.”

Regardless of whether or not the SEC’s permission was needed to acquire the three firms, their acquisition does place Coinbase under the legal jurisdiction of the SEC and Finra. In the past, Coinbase was regulated by various authorities on a state-by-state basis.

“This is not only a good thing for our company but a good thing for our industry,” said Adam White, general manager of Coinbase’s institutional branch. “We’re going to move at pace at which regulators are comfortable.”