Federal Court Asked To Decide Key Crypto Case By Coinbase

Coinbase has asked the Second Circuit Court of Appeals to decide if trades on its platform follow federal rules about securities. The request is meant to clear up confusion for the huge crypto industry, banks, and other users.

According to Bloomberg Law, Coinbase said its platform, which works like a “matchmaker” to connect buyers and sellers anonymously using a blind bid-ask system, doesn’t meet the rules in the Howey test. This test has been used for a long time to decide if something counts as an investment contract.

Coinbase Urges The Court To Act Quickly In Its Appeal

The case is urging the court to step in quickly. Coinbase reportedly said in its paperwork that the decision will have big effects on the whole crypto world.

This appeal happened after the Southern District of New York (SDNY) agreed to pause the SEC’s case against Coinbase. The pause gives Coinbase time to ask for help from a higher court. This was an important moment in a case that started in June 2023 when the SEC said Coinbase was acting like an unregistered securities broker, exchange, and clearing agency.

While Coinbase looks for answers, the SEC seems to be changing its mind now that the Trump administration, which backs crypto, is in charge. On the same day Coinbase filed its appeal, the SEC, now led by Acting Chair Mark Uyeda, said it was introducing a new crypto task force headed by Commissioner Hester Peirce.

This group wants to move from simply punishing companies and start giving clearer rules to help crypto grow and prevent scams. The SEC admitted it had mostly been using punishments to control cryptocurrency and now says it wants to focus on creating easier rules to follow.

The outcome of Coinbase’s appeal could change how crypto trading is handled in the U.S. If Coinbase wins, it could mean the SEC has less control, helping crypto grow. But if Coinbase loses, the SEC could get stronger and change how crypto platforms work.

Coinbase Resumed Bitcoin-Backed Loans In The U.S., Excluding New York Users

Coinbase also recently resumed its Bitcoin-backed loan services in the U.S, letting people borrow money using their Bitcoin as a promise to pay it back.

This new loan program lets U.S. users (excluding people in New York) borrow up to $100,000 in USD Coin. Coinbase is working with Morpho Labs, a decentralized finance group, to handle the lending. This will all happen on Base, Coinbase’s Ethereum layer-2 network.

Coinbase Executive Max Branzburg noted that this new program shows Coinbase’s promise to give people economic freedom. He said these loans let people do more with their Bitcoin, and the team is making it work on the blockchain.

A Coinbase spokesperson said the exchange makes it easy to join the loan system but doesn’t give the loans directly.

This new loan program is Coinbase’s second try at Bitcoin-backed loans. Back in May 2023, Coinbase said it would stop its Borrow program, which let people get cash loans with their Bitcoin. That program officially ended on November 20, 2023.