The United States Securities Exchange Commission (SEC) has responded to Coinbase’s request for clear cryptocurrency regulations in a formal court filing. In the court documents filed on May 15, 2023, the SEC acknowledged that the rulemaking process could take several years and emphasized that enforcement actions would continue in the interim.
The SEC argued that there is no need for new regulations as digital assets are already considered securities under existing laws. Coinbase’s petition for an “immediate determination” was seen by the SEC as a call to replace current securities laws and regulations with a comprehensive regulatory framework specifically tailored for trading crypto assets classified as securities. The regulator stated that Coinbase’s requested requirements were complex and proposed within an unreasonably short timeframe.
Furthermore, the SEC requested that the court reject Coinbase’s plea for Mandamus. According to the regulator,
“Mandamus is an extraordinary remedy—one that requires the petitioner to show a clear and indisputable right to relief. Coinbase does not and cannot demonstrate such a right.”
In response to the SEC’s court filing, Paul Grewal, Coinbase’s chief legal officer, tweeted that the documents provided insights into the regulator’s stance on regulatory frameworks in the cryptocurrency industry.
Today’s filing may be the first time when the SEC has formally explained in court its views on whether and how the SEC should create rules for the crypto industry. 2/7
— paulgrewal.eth (@iampaulgrewal) May 16, 2023
Grewal highlighted the need for further clarification on several aspects of the SEC’s response. He noted that while the SEC currently relies on enforcement actions rather than specific rules, these actions could potentially serve as guidance for future rulemaking, even if such rulemaking has not yet been planned.
In Grewal’s words:
“Overall the SEC’s response reinforces Coinbase’s longstanding concern that our industry does not have clarity on what the SEC may consider to be within or outside its jurisdiction at any time, and it is likely to continue changing its mind along the way.”
Earlier this month, Coinbase expressed concerns about the SEC’s proposed regulation on registered investment advisers’ responsibilities regarding client assets. The company criticized the proposed rule, Safeguarding Advisory Client Assets, Proposed Rule 223-1, for unfairly targeting cryptocurrencies and making inaccurate assumptions about custodial practices based on traditional securities. Coinbase urged the SEC to revise the proposal and provide clear guidance to ensure the protection of all types of assets, including cryptocurrencies not classified as securities.
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