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Late last month, Coinbase – which had earlier received a Wells notice, an informal alert from the SEC typically preceding a lawsuit – petitioned the courts to compel the agency to explicitly clarify what measures they should undertake to ensure compliance.
Conversely, the SEC has remained reticent.
Preference for Constructive Dialogue
As stated by Brian Armstrong – the CEO of Coinbase – his company aims to counter the prevailing trend of regulation through enforcement and aspires to foster collaboration and constructive dialogue concerning regulation.
“Spent the day in DC meeting with members of Congress. We need regulatory clarity in the U.S. for the centralized players in crypto for many reasons – consumer protection, national security, economic growth, etc. The SEC has caused untold harm to America with its policy of regulation by enforcement. We will fight to fix that.”
The executive further mentioned that the firm is prepared to defend itself in court but would prefer to avoid that scenario and emphasized that he and his exchange are receptive to good faith discussions with regulators.
Existing Framework Asserted by Gensler
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Despite Coinbase’s readiness to negotiate, Gary Gensler, the SEC chair, asserted in court that the current regulations are already clear and that crypto exchanges simply choose not to acknowledge them, as reported by Bloomberg.
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In response, Coinbase sought a definitive rule-making framework to follow, proposed through a notice-and-comment procedure that would permit public examination of the newly clarified regulations.
Unfortunately for the exchange, the SEC sought to deny the request in court, indicating that establishing regulations could take years.
“Coinbase’s preference for faster or different regulatory action by the commission does not entitle it to extraordinary relief from this court. The petition should be denied.”
Paul Grewal, Coinbase’s chief legal officer, took to Twitter to reiterate his firm’s position that the SEC fails to provide clarity to the companies it oversees.
The securities regulator has indicated that Gensler’s public remarks should not be interpreted as policy statements – even while acknowledging that they may continue to utilize enforcement actions in place of a regulatory framework until they have refined the details.
In the interim, Coinbase has maintained its stance, asserting that they do not list securities. According to a company spokesperson, the exchange already considers SEC guidelines regarding securities when determining which tokens to list, resulting in the rejection of approximately 90% of applications.
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