SEC Rejects Coinbase Petition For Impending Crypto Rules
In July, 2022, Coinbase crypto exchange filed a petition to the U.S. Securities and Exchange Commission (SEC) requesting the comprehensive and well-defined regulating rules for digital assets’ operations in response to an obscurity in that dimension. To be more specific, this call was particularly aimed at imminent elaboration of a properly “functioning market in digital asset securities due to the lack of a clear and workable regulatory regime” and level the absence of clarity in determination of a certain crypto currency or token as a security. The petition itself demanded for inclusively outlined classification of digital assets and determination of which ones are the securities. Besides, Coinbase shared a concern regarding the crypto entities as subjects to registration with the SEC and uncertainty of their status on the whole.
This petition, however, remained unanswered (presumably — ignored) for more than 9 months, forcing Coinbase to push harder and filing a court action to necessitate U.S. security policies.
“The SEC is required by law to respond to petitions “within a reasonable time,” but they have not yet responded to our petition from last July, which is why we filed our action in court today. (…) 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”,
Paul Grewal, Chief Legal Officer at Coinbase, giving his comments on an exceedingly durable absence of SEC’s response to its petition.
Abruptly, on May 15, 2023, the SEC finally gave its formal response to the petition and predictably rejected it. According to brief of responded filed by U.S. Court of appeals, the SEC contended that Coinbase’s complex request cannot be implemented for such a short amount of time the exchange demanded. Besides, SEC also stated that clear crypto regulation may take a huge amount of time to carry out, hence the enforcement actions will keep on processing.
Remarkably, as Paul Grewal said:
“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”
And indeed, the official rhetoric of SEC has never included the explanation of possible regulations and reasons for its postponing as well as it has never commented on whether digital assets should be defined as securities. Or it did?…
Gary Gensler, the chairman of SEC, has repeatedly stated the importance of crypto regulations and determine the stablecoins, crypto platforms and crypto tokens as securities hence considered ones a jurisdiction of the U.S. Securities and Exchange Commission.
“There’s no reason to treat the crypto market differently just because different technology is used. We should be technology-neutral. (…) it is important that we work to get crypto tokens that are securities to be registered with the SEC. (…) The crypto market is highly concentrated, with the bulk of trading taking place on only a handful of platforms (…) these platforms likely are trading securities”,
Gary Gensler’s remarks on crypto markets
And notably, the SEC contradicted Gensler’s views on crypto and securities. “The SEC also said that the public statements by Chair Gensler are not formal guidance or policy statements from the SEC and the public cannot rely on them as such”, Paul Grewman stated. The initial reason for such a controversy remains unknown, but it is observed more straight when the official claims of SEC are brought up:
“Neither the securities laws nor the Administrative Procedure Act impose on the Securities and Exchange Commission an obligation to issue the broad new regulations regarding ‘digital assets’ Coinbase has requested (…) As Coinbase’s own submissions make clear, considering the various paths it suggests is a necessarily complicated endeavor. Yet Coinbase filed its rulemaking petition fewer than ten months ago, supplemented aspects of the petition fewer than three months ago, and sought to supplement the record again only weeks ago”
From what has been stated above, we might easily conclude that the U.S. measures of limiting the crypto industry are up and running, given the SEC unveiling its true face of not a regulator but an enforcer, deliberate substitution of the concepts and contradiction of vectors. The government bodies are pressuring the crypto realm hiding behind the mask of regulatory policy, and Coinbase’s petition caused SEC to literally admit it, making it a remarkable precedent. Depressful to acknowledge but these steps are bearing fruit (namely Bittrex U.S. bankruptcy and its shifting to the European market). Simultaneously the European-based exchanges are showing their skyrocketing popularity. Case in point: Ukraine-originated WhiteBIT exchange hitting the fourth place among global exchanges with the vastest user traffic. That tendency has many reasons, and one of them is undoubtedly a harsh U.S. crypto market environment.
