- Coinbase has waited since 2022 for a response from the Securities and Exchange Commission on its formal petition to request tailored regulations for crypto, even seeking to force an answer through the courts, and the rejection has now arrived.
- The SEC says there’s no reason to craft a new regime for crypto, and that it’s already writing some targeted crypto rules and conducting enforcement actions under existing authorities, though two of the five commissioners disagreed.
- Coinbase said it’ll take the matter back to court.
U.S. crypto exchange Coinbase’s petition to the Securities and Exchange Commission (SEC) to prod it toward a system of tailored rules for digital assets was rejected by the regulator on Friday.
“The existing securities regime appropriately governs crypto asset securities,” said Chair Gary Gensler, in a statement issued with the denial. Besides arguing that the SEC has sufficient authority in today’s laws, he said the industry watchdog has already been engaging in rule proposals to directly regulate crypto businesses, and its enforcement division has also been able to address wrongdoing.
Gensler made a third argument, too, that “it is important to maintain commission discretion in setting its own rulemaking priorities.”
Coinbase had applied this formal pressure in 2022, before it was itself sued by the SEC as an unregistered securities exchange. Earlier this year, the company had asked a federal court to force a response from the agency, which has now arrived.
“The commission disagrees with the petition’s assertion that application of existing securities statutes and regulations to crypto asset securities, issuers of those securities, and intermediaries in the trading, settlement, and custody of those securities is unworkable,” the five-member commission concluded in its two-page response, which said the agency had given the request careful consideration. “The commission concludes that the requested rulemaking is currently unwarranted and denies the petition.”
Coinbase Chief Legal Officer Paul Grewal said the company will further challenge this rejection in court, calling the SEC’s decision an “abdication of its duty.”
“No one looking fairly at our industry thinks the law is clear or that there isn’t more work to do,” Grewal said in a statement.
Commissioners Hester Peirce and Mark Uyeda opposed the SEC’s denial.
“We hope that interested persons continue to posit specific rule changes, guidance, and exemptions that would form a useful basis for the crypto industry to continue its development within the United States,” the Republican commissioners argued in a statement. “While we are disappointed that the commission is not hosting these important conversations, we will have an open ear for conversations that others host and the ideas that emerge from those conversations.”
Grewal said that Coinbase is “grateful that two commissioners disagreed with the denial and called for real dialogue.”
“We should be working together to create laws and rules that will benefit consumers and US innovation, not defending lawsuits based on legal positions that change month after month,” he said.
A footnote in Gensler’s statement argues that Coinbase’s own petition repeatedly refers to “digital asset securities” and the SEC’s authority over them, “thus acknowledging that crypto assets can be offered and sold as securities and subject to oversight by the SEC.”
Gensler had also noted – without naming Prometheum Inc. – that a crypto broker has used a special digital assets registration, suggesting this method of compliance is “workable.”
Seeking a wider, industry-specific system of regulations in the U.S. has been the leading priority of crypto lobbyists in Washington. So far, legislative efforts this year in Congress have made progress but failed to reach the finish line. While the SEC pushes back on the need for tailored rules on the securities side, the wider Financial Stability Oversight Council that includes the agency’s chairman as a member concluded in its annual report yesterday that crypto does need Congress to intervene with regulations.
The U.S. Securities and Exchange Commission (SEC) recently denied a request by cryptocurrency exchange Coinbase to adopt new regulations for the crypto industry. In a letter to Coinbase, the regulator stated that it believes there is no need for such regulations at this time, calling the exchange’s push for regulation “unwarranted”.
The SEC’s decision comes at a time when the cryptocurrency market is booming, with a growing number of investors and businesses entering the space. Coinbase, one of the largest crypto exchanges in the U.S., has been a vocal advocate for clearer regulations in an effort to promote a safer and more transparent market.
This denial by the SEC has sparked a heated debate within the crypto community, with many arguing that clear regulations are essential for the growth and stability of the industry. In this article, we will delve into the details of the SEC’s decision, the implications for Coinbase and the broader crypto market, and what this means for the future of cryptocurrency regulations in the U.S.
Background on Coinbase’s Push for Regulations
Coinbase has been at the forefront of efforts to bring greater clarity and regulatory oversight to the crypto industry. The exchange has advocated for clear guidelines on how digital assets are classified and regulated, as well as more transparency and investor protection in the market.
In a proposal submitted to the SEC, Coinbase outlined a framework for how crypto regulations could be implemented, including a new regulatory body that would oversee the digital asset market. The exchange argued that the current regulatory landscape is unclear and outdated, which puts investors at risk and stifles innovation in the industry.
The SEC’s Response
In its response to Coinbase’s proposal, the SEC stated that it does not see a need for new regulations in the crypto space at this time. The regulator argued that existing laws and regulations are sufficient to address the various issues that may arise in the industry, and that introducing new rules could be premature and potentially harmful.
The SEC also raised concerns about the potential negative impact of overregulation on innovation and market growth. The regulator emphasized the need to strike a balance between promoting innovation and protecting investors, and expressed reservations about creating a new regulatory body specifically for the crypto market.
Implications for Coinbase and the Crypto Market
The SEC’s denial of Coinbase’s push for regulations has significant implications for both the exchange and the broader crypto market. For Coinbase, this decision may impact its ability to offer new products and services, as well as its overall growth and expansion plans.
The denial could also affect investor confidence in the exchange, as it may signal a lack of regulatory clarity and oversight in the crypto market. This could in turn impact the valuation of Coinbase and its ability to attract new customers and partners.
In terms of the broader crypto market, the SEC’s decision raises questions about the future of regulations in the U.S. Many in the industry have long called for clearer guidelines and oversight, and the denial of Coinbase’s proposal may further delay the establishment of a comprehensive regulatory framework.
What This Means for the Future of Crypto Regulations
The denial by the SEC is a setback for those advocating for clearer regulations in the crypto industry. It highlights the challenges and complexities of regulating a rapidly evolving and innovative market, and raises questions about the best approach to fostering a safe and thriving environment for digital assets.
Moving forward, it is likely that the debate around crypto regulations will continue to intensify, with stakeholders on all sides pushing for their respective interests. It remains to be seen how the SEC’s decision will impact future regulatory efforts, and what it means for the long-term stability and growth of the crypto market in the U.S.
In conclusion, the SEC’s denial of Coinbase’s push for crypto regulations as ‘unwarranted’ is a significant development with far-reaching implications for the exchange and the broader cryptocurrency market. It underscores the challenges and complexities of regulating the crypto industry, and raises questions about the future of regulations in the U.S. As the industry continues to evolve, it will be crucial for all stakeholders to work together to find the right balance between innovation and investor protection, and to create a regulatory framework that promotes a safe and transparent market for digital assets.
The SEC’s refusal to regulate Coinbase’s crypto operations is concerning for investor protection.