Coinbase, the foremost U.S. digital currency platform, has initiated legal action against the Securities and Exchange Commission (SEC) in a bid to demand the regulatory authority to offer indispensable guidance for the evolving crypto industry.
Coinbase approached a US federal court to get the SEC to address its rulemaking petition within a week. Last July, the exchange requested the SEC establish and adopt regulations. This would determine which digital assets are securities and how securities laws should apply to them.
Coinbase, registered in Delaware, argued that the US currently lacks a clear or functional system for the smooth operation of the market. In March this year, the company sought clarity from the SEC regarding the treatment of staking services.
The recent federal court filing from Coinbase stated,
Coinbase does not ask the Court to instruct the agency how to respond. It simply requests that the Court order the SEC to respond at all.
Crypto Industry Dissatisfied with Existing Framework
Although the SEC released a framework in 2019 detailing how digital assets fit into investment contracts and securities laws, the US crypto ecosystem at large has found it unsatisfactory.
SEC Chairman Gary Gensler repeatedly declares that the majority of the 10,000 cryptocurrencies in the market are considered securities. Only one exception exists Bitcoin. Gensler’s stance on Ether is still uncertain, however, he is urging crypto businesses to register with the SEC.
The SEC has informed Coinbase through a Wells notice of its intention to take enforcement action against the company. In September 2021, Coinbase also received a Wells notice regarding its proposed interest-generating crypto accounts, which were later abandoned.
According to Coinbase, the SEC’s lack of formalized decision-making has caused uncertainty for crypto companies. This has prevented them from properly preparing for the future. Paul Grewal, CLO of the exchange, stated SEC’s enforcement actions stem from an undisclosed legal viewpoint.
Coinbase is one of several crypto firms facing the SEC’s wrath for allegedly offering unregistered securities. CEO Brian Armstrong has suggested that the company might consider leaving the US, stating, “Anything is possible, including relocating.”
Grewal believes the company has a duty to various stakeholders to exhaust all efforts in obtaining regulatory clarity in the US. The filing of Coinbase is just a tiny but crucial part of their ongoing appeal to leaders in Washington for clear regulations.