CryptoregulationPolicy Debates
Tokenization firms reject Coinbase's crypto bill equities claims
The crypto establishment is once again at war with itself, and this time the battlefield is the very definition of a security. In a move that has sent shockwaves through the regulatory discourse, a coalition of major tokenization firms—heavyweights like Paxos and Circle among them—have publicly and forcefully rejected claims made by Coinbase in its aggressive push for new crypto legislation.The core of the dispute is as fundamental as it gets: Coinbase’s proposed framework, embedded within its lobbying efforts for the FIT for the 21st Century Act, argues that digital assets issued and transferred on a blockchain should not be classified as securities, drawing a parallel to how equities are treated once they are settled. This, according to the exchange, provides the regulatory clarity the industry desperately needs.But the tokenization players aren’t having it. In a sharp rebuttal, they’ve called the comparison “flawed” and “dangerously simplistic,” arguing that applying such a blanket exemption would create a massive, unregulated loophole, undermining decades of investor protection principles established under the Howey Test and subsequent case law.They contend that the nature of the asset itself—not just the settlement mechanism—must dictate its classification. A token representing a share of a company or a piece of real estate carries the same expectations of profit from the efforts of others as its traditional counterpart; slapping it on a blockchain doesn’t magically dissolve those inherent characteristics or the need for disclosure and oversight.This isn’t just academic bickering; it’s a high-stakes fight over the soul of the future financial system. The tokenization firms, who are actively bringing trillions in real-world assets (RWA) on-chain, understand that their entire business model depends on legitimacy and institutional trust.They fear that Coinbase’s approach, if adopted, would taint the entire sector with the brush of the “wild west” ICO era, scaring away the very pension funds and asset managers they are trying to attract. They want clear, asset-specific rules, not a broadside deregulation that could invite the next FTX-scale disaster.On the other side, Coinbase and its allies see the current SEC enforcement-by-litigation strategy as an existential threat to innovation in the United States, pushing development offshore. Their argument is one of technological neutrality: a stock certificate, a book-entry in the DTCC, and a token on a blockchain are just different forms of recording the same underlying ownership right.The problem, as always, is Gary Gensler’s SEC, which has taken the position that virtually all crypto assets, except perhaps Bitcoin, are securities. This clash reveals the deep fissure within the crypto industry itself.
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#tokenization
#Coinbase
#crypto bill
#securities law
#regulatory debate
#digital assets
