Coinbase sues the SEC to force a regulatory response
By: Micheal Wilson
April 25, 2023 6:33 AM
Coinbase is attempting to compel the SEC to react to its petition for crypto industry guidelines, which has been pending since July.
Coinbase has launched an action in a federal court in the United States seeking to compel the country's securities regulator to issue a "yes or no" response to a petition→ filed by the exchange in July 2022.
The Securities and Exchange Commission (SEC) was petitioned to develop and implement clearer regulatory standards for the cryptocurrency industry in the United States.
Coinbase petitioned the SEC to answer 50 specific concerns about the regulatory handling of various digital assets. The queries varied from requesting clarification from the SEC on how it classifies tokens as securities to requesting clearer criteria for the buying and sale of cryptocurrencies on SEC-regulated exchanges.
The action→ was accompanied by a blog post→ written by Coinbase Chief Legal Officer Paul Grewal, who stated that the Administrative Procedure Act→ requires the SEC to reply to the exchange's rulemaking petition "within a reasonable time."
After more than nine months with no response, the exchange is pushing hard for an answer:
"It seems as though the SEC has decided ahead of time to reject our petition. However, they have not yet informed the public. So the action Coinbase filed today simply requests that the court request that the Securities and Exchange Commission reveals its conclusion."
"It's essential that the Securities and Exchange Commission and any other agency petitioned for regulation to react to the petition when the agency has decided," Grewal emphasized.
Grewal stated that clarity on these issues is critical, especially given that Coinbase got a Wells Notice from the SEC on March 22, hinting at probable enforcement actions against the crypto exchange.
Grewal added, "Coinbase along with other crypto companies face potential regulatory penalties from the SEC, although we haven't been told why the SEC thinks the law applies to our business."
On February 9, Coinbase's peer exchange Kraken settled with the SEC for $30 million for failing to register its staking-as-a-service business, which the SEC said was security.
Internally, this move was contentious, with SEC Commissioner Hester Peirce calling the SEC's actions "not an efficient or fair way of regulating" and criticizing her own agency for closing down a "program that has served people well."
Earlier this year, on February 12, the SEC and the New York Department of Financial Services ordered Paxos, the issuer of the US dollar-pegged stablecoin Binance USD (BUSD), to cease minting and issuing the token.
Adding to the barrage of anti-crypto activity in the United States, Democratic Massachusetts Senator Elizabeth Warren said on March 31 that she will establish a "anti-crypto army" as part of her Senate re-election campaign.
A screenshot from Warren's re-election campaign video in which she promises to establish a "anti-crypto army." source: Twitter→
As the United States becomes more hostile to the cryptocurrency business, Coinbase has indicated its desire to relocate some of its operations elsewhere. Coinbase got a license to operate in Bermuda on April 19 and is apparently planning to establish a futures exchange there as soon as this week.
Because Coinbase is the only publicly traded cryptocurrency exchange in the United States, experts will be watching the exchange's upcoming earnings report→ on May 4 to measure the health of the broader crypto sector in the United States.