Coinbase has filed an action in a United States federal court seeking to compel the country’s securities regulator to provide a “yes or no” response to a petition that the exchange has had pending since July.
The petition requested the Securities and Exchange Commission propose and adopt clearer regulatory guidelines for the cryptocurrency industry in the U.S.
In the petition, the exchange asked the financial regulator to answer a total of 50 specific questions concerning the regulatory treatment of certain digital assets. The questions are broad in scope and range, including asking the SEC to provide clarification about how it goes about classifying tokens as securities.
Accompanying the action was a blog post penned by Coinbase Chief Legal Officer Paul Grewal, who said the Administrative Procedure Act requires the SEC to respond to the exchange’s rulemaking petition “within a reasonable time.”
Today, we filed a narrow action in the U.S. Circuit Court to compel the SEC to respond “yes or no” to a rulemaking petition we filed with them last July asking them to provide regulatory guidance for the crypto industry. 1/4 https://t.co/rlsS1DIFfl— paulgrewal.eth (@iampaulgrewal) April 25, 2023
Now that more than nine months have passed with no response, the exchange is pushing hard to get an answer:
“It seems like the SEC has already made up its mind to deny our petition. But they haven’t told the public yet. So the action Coinbase filed today simply asks the court to ask the SEC to share its decision.”
"It’s important for the SEC and any other agency petitioned for rulemaking to respond to the petition once the agency has made up its mind, especially if the answer is no," Grewal explained.
Grewal explained that clarity on these matters is of the utmost importance, especially considering the fact that Coinbase received a Wells notice on March 22, which hints at potential enforcement actions against the crypto exchange.
"Coinbase and other crypto companies are facing potential regulatory enforcement actions from the SEC, even though we have not been told how the SEC believes the law applies to our business,” Grewal added.
On Feb. 9, Kraken reached a settlement with the SEC for “failing to register the offer and sale of their crypto asset staking-as-a-service program,” which the watchdog claimed were securities under its oversight. The exchange agreed to cease operations of its staking-as-a-service program for U.S. customers and handed over a $30 million fine.
This move proved unpopular internally, with SEC Commissioner Hester Peirce labeling the SEC's conduct as "not an efficient or fair way of regulating” and slammed her own agency for shutting down a “program that has served people well.”
Related: SEC’s ‘brute force’ crypto regulation attempt is ‘bad policy’ — Paradigm
Earlier in the year, on Feb. 12, the SEC and the New York Department of Financial Services ordered Paxos, the issuer of the U.S. dollar-pegged stablecoin Binance USD (BUSD), to stop minting and issuing the token.
Adding to the slew of action against crypto in the U.S., Democratic Massachusetts Senator Elizabeth Warren announced on March 31 that she would be forming an “anti-crypto army” as a key part of her Senate re-election campaign.
As the U.S. becomes more fervently opposed to the crypto industry, Coinbase has signalled its intention to move part of its operations elsewhere. On April 19, Coinbase received a license to operate in Bermuda and is reportedly seeking to launch a derivatives exchange there as soon as this week.
With Coinbase being the only publicly-traded cryptocurrency exchange in the United States, analysts will be looking at the exchange’s upcoming earnings report on May 4 to gauge the health of the wider crypto sector in the U.S.
Update (April 25, 3:15 am UTC): This article has been updated to include more information from Coinbase's action and blog post along with further background information.
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