SEC urges court to reject Coinbase’s demand for regulatory clarity
Coinbase requested the US Securities and Exchange Commission (SEC) to clarify how the country’s securities laws apply to crypto. The regulatory watchdog claims that the exchange’s demand is baseless and unwarranted.
Coinbase, the largest cryptocurrency exchange in the US, took legal action last month by submitting a petition in a federal court against the U.S. Securities and Exchange Commission (SEC).
The petition urged the SEC to offer more transparent regulations and guidance for the cryptocurrency industry.
The SEC has responded to Coinbase’s petition in a court filing, denying the exchange’s allegations that the agency has been unreasonably slow in responding. The commission’s lawyers argue that Coinbase’s preference for faster or different regulatory action does not entitle it to extraordinary relief. They firmly assert that the petition should be denied.
SEC сhair Gary Gensler has consistently maintained that most digital assets are securities and that existing rules are clear, emphasizing that crypto firms choose not to comply with them. The relationship between Coinbase and the SEC has significantly deteriorated, with Wells Notices issued and accusations of sketchy behavior.
Coinbase’s chief legal officer, Paul Grewal, expressed his surprise at the SEC’s formal explanation of its views on creating rules for the crypto industry in court. The SEC argues that regulatory changes require careful consideration and no set deadline for completing its work. The commission asserts that Coinbase has not suffered any harm due to the lack of action on its petition, highlighting that it can enforce existing legal requirements while considering amendments.
Enforcement actions and potential impact on exchanges
The SEC’s recent enforcement efforts targeting crypto exchanges, such as Kraken and Bittrex, have raised concerns about the future and business model of the industry. Kraken settled with the SEC earlier this year, discontinuing its staking service in the US. Meanwhile, Bittrex faced charges for operating an unregistered national securities exchange, broker, and clearing agency, ultimately leading to a bankruptcy filing.
These enforcement actions have sparked fears regarding the potential impact on Coinbase. Analysts estimate that a significant portion of Coinbase’s net revenue in the first quarter is derived from sources unrelated to bitcoin (BTC), which falls outside the SEC’s oversight. However, it is anticipated that the SEC could target these revenue sources in an upcoming enforcement action.
Coinbase’s request for regulatory clarity and guidance echoes the persistent uncertainty surrounding the regulatory landscape of the cryptocurrency industry in the United States. It will be recalled that ongoing uncertainty surrounding the regulatory environment for cryptocurrencies in the United States has prompted businesses like Coinbase to consider relocating to more crypto-friendly jurisdictions.
In response to businesses considering relocation to more crypto-friendly jurisdictions, the SEC remains firm, emphasizing that existing rules are clear and must be followed.
The outcome of Coinbase’s petition will have significant implications for the crypto industry, shaping the relationship between regulators and market participants. As the court evaluates Coinbase’s request, industry stakeholders eagerly await a resolution that will provide greater clarity and stability for the future of cryptocurrencies within the United States.
