SEC seeks denial of Coinbase petition for clear crypto regulatory guidelines

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Key Takeaways

  • SEC argues that it is under no obligation to meet the requirements of Coinbase outlined in its petition.
  • Coinbase Chief Legal Officer Paul Grewal said that the filing might be the first time SEC has explained its views on whether the SEC should create rules for the crypto industry. 

The United States Securities Exchange Commission’s recent crypto crackdown has faced immense backlash from the crypto sector.

The crackdown got severe to the point crypto exchange Coinbase in April filed a complaint against the SEC, seeking to compel the agency to provide clear regulatory guidelines for crypto firms operating in the country.

SEC has now finally given a formal response to Coinbase’s April petition for clear crypto regulation. The commission, in its response, has stated it is under no obligation to meet the requirements of Coinbase outlined in its petition while claiming that Coinbase has called for a complex set of reforms and rule-making in an unreasonably short amount of time.

In the petition, Coinbase has asked SEC to answer 50 specific questions concerning the regulatory treatment of certain digital assets. 

SEC in its response, has asked the court to deny Coinbase’s petition for mandamus, arguing that mandamus is an “extraordinary remedy” and that the exchange “does not and cannot demonstrate a right” to relief.

“Neither the securities laws nor the Administrative Procedure Act imposes on the Securities and Exchange Commission an obligation to issue the broad new regulations regarding ‘digital assets’ Coinbase has requested,” the SEC argued.

The SEC’s argument for seeking denial is rooted in their assertion that Coinbase lacks persuasive evidence to support the claim that the SEC’s inaction on the petition since its initial filing has caused any harm. “The Commission continues to consider Coinbase’s petition in the ordinary course,” the agency said.

Commenting on the development, Coinbase Chief Legal Officer Paul Grewal said that the filing may be the first time the securities regulator has explained its views on whether the SEC should create rules for the crypto industry. 

“The SEC acknowledged that it will continue to use enforcement actions as a substitute for rulemaking for the foreseeable future, but not to worry — those enforcement actions may eventually ‘inform’ not-yet-planned rulemaking,” Grewal’s tweet reads.

The SEC response to the Coinbase petition came just hours after the SEC Chair Gary Gensler hit back at Coinbase, asserting that crypto rules have already been published. In his keynote speech, Gensler argued that SEC has already put out the rules for what is required to custody assets, be an exchange, broker-dealer/advisor, and how to register securities offerings with the agency.

As Coinbase engages in a legal battle with the SEC, several US lawmakers have expressed apprehension over the absence of regulatory clarity in the country, combined with the crypto-friendly policies of jurisdictions abroad. They fear that this combination could prompt an outflow of innovation.

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Saniya Raahath
Saniya Raahath

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