Quick Breakdown
- Vitalik Buterin backs Base’s decentralized design, calling it a “true layer-2.”
- SEC Commissioner Hester Peirce raised concerns about sequencers acting like exchanges.
- Coinbase argues sequencers are infrastructure, not marketplaces for securities.
Ethereum co-founder praises layer-2 structure
Ethereum co-founder Vitalik Buterin has come to the defence of Coinbase’s layer-2 network, Base, following growing debate over whether its transaction sequencer should be considered an exchange.
“Base is doing things the right way: an L2 on top of Ethereum, that uses its centralized features to provide stronger UX, while still being tied into Ethereum’s decentralized base layer for security,”
Buterin said on Tuesday.
He stressed that Base, unlike custodial platforms, cannot seize or block withdrawals.
“True layer-2s are non-custodial,”
he added.
“They are extensions of Ethereum, not glorified servers that happen to submit hashes.”
SEC commissioner raises questions
The comments come after U.S. Securities and Exchange Commissioner Hester Peirce suggested in a September 7 podcast that some L2 sequencers resemble “matching engines” and could fall under securities exchange rules.
“If you have a matching engine that’s essentially controlled by one entity … that looks a lot more like an exchange,”
she said, though clarifying that non-securities assets fall outside the SEC’s remit.
Coinbase pushes back
Coinbase’s chief legal officer, Paul Grewal, rejected the notion, arguing that sequencers function as blockchain infrastructure, not marketplaces. “If an exchange runs on AWS, is AWS an exchange? Obviously not,” he noted.
Grewal emphasized that layer-2s process all forms of transactions—payments, smart contract calls, and messages—without pairing buyers and sellers like an exchange would.
Sequencer role clarified
Base co-founder Jesse Pollak likened sequencers to traffic controllers, ensuring efficient flow but without executing trades. He underlined that users can bypass sequencers and interact directly with Ethereum, preserving censorship resistance.
1/ as a follow-up to @iampaulgrewal‘s comments, I want to provide more detail on how the @base sequencer actually works — and fully shut down the FUD that folks are actively spreading around the role sequencers play https://t.co/IEutNTbuov
— jesse.base.eth (@jessepollak) September 22, 2025
Industry participants warn that classifying L2s as exchanges could force them into heavy regulatory frameworks, potentially stifling innovation.
In January, Pollak hinted that the team is exploring the possibility of introducing COIN to Coinbase’s layer-2 network in 2025. While Pollak emphasized that discussions are ongoing, he clarified that there are currently no definitive plans in place.
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