Coinbase has filed a petition against the U.S. Securities and Exchange Commission (SEC) in a federal court to compel the agency to provide more regulatory clarity and guidance for the crypto industry.
Coinbase takes a proactive approach
Coinbase, the largest bitcoin (BTC) trading venue and crypto exchange in the U.S. by trading volume, has decided to take a proactive approach toward tackling the issue of lack of regulatory clarity in the region.
It will be recalled that Coinbase received a Wells notice from Gary Gensler’s SEC last month, notifying the exchange of an impending enforcement action against it by the dreaded regulatory watchdog, due to a possible violation of its securities law.
In the latest development, the Brian Armstrong-led exchange, which had earlier made it clear that it will not hesitate to slug it out with the agency at the court of law, rather than be bullied into pleading guilty for an offense it never committed, has filed a narrow action suit against the agency.
Per a blog post by Coinbase, the lawsuit seeks to compel the SEC to “respond yes or no” to its previous petition asking the agency to “use its formal rulemaking process to provide guidance” for the web3 space.
SEC stifling web3 growth
The exchange noted that its July 2022 petition identified the key areas the SEC must clarify in its rulemaking process, including pointing out the exact cryptoassets that are securities, registration of issuers, mandatory disclosures, exemptions, and registration of exchanges.
Yet the agency has failed to make the necessary move since that time and has instead, resorted to embarking on enforcement actions against legit crypto market participants, all in the name of regulating the industry.
“In Dec. 2022 and March 2023, Coinbase filed supplemental comments reiterating the need for rulemaking and offering more specific suggestions. And over the course of more than 30 meetings in the past year, Coinbase presented multiple potential registration paths that the SEC could consider for any digital assets that are properly subject to registration. Yet more than nine months (and counting) after Coinbase submitted its original petition, the SEC still has taken no action on Coinbase’s petition or provided any feedback. Instead, it has ramped up efforts to regulate retrospectively by bringing enforcement actions.”
Coinbase statement.
Moreover, Coinbase has argued that the Administrative Procedure Act (APA) mandates the SEC to respond to its rulemaking petition within a reasonable timeframe.
The exchange noted that Coinbase will be able to challenge the SEC’s decision in court and explain the importance of rulemaking.
Furthermore, the exchange made it clear that regulatory clarity is long overdue for the U.S. crypto space, as market participants still do not understand how the SEC’s rules apply to their businesses.
Yet, these entities constantly face the risk of legal enforcement from the agency.
Coinbase has vowed to continue to take necessary steps to seek regulatory clarity and remain available for dialogue with the SEC and relevant regulators on these issues.
In related news, Coinbase recently signaled plans to dump the U.S. and expand operations to other crypto-friendly jurisdictions if the current regulatory uncertainties continue.
So far, the exchange has secured regulatory licenses in a number of jurisdictions, including Bermuda, Ireland Italy, and more. It won’t come as a surprise if the publicly-listed crypto exchange decides to call it quits in the U.S. someday.