SEC Responds to Coinbase, Says No New Regulations Will be Issued Soon

  • The U.S. SEC claimed in its response that it was under no obligation to issue new regulations for crypto, and that rules for crypto were already published and were sufficient.
  • The agency also tried to distance itself from any public comments made by its chair Gary Gensler, particularly regarding his statement that most cryptocurrencies are securities.

U.S. Securities and Exchange Commission building in Washington DC, October 12, 2018. Andriy Blokhin/Shutterstock

The legal battle between Coinbase and the Securities and Exchange Commission (SEC) continues, with the regulator saying it was under no obligation to issue new regulation, the exchange’s chief legal officer Paul Grewal said via Twitter on 16 May.

According to court documents filed on 15 May, the SEC argued that it is not obligated to meet the requirements outlined in the exchange’s petition, claiming that Coinbase has requested a complex set of reforms and rule-making to be made in an unreasonably short period. Coinbase’s petition for mandamus — a judicial remedy to compel action by a public official — has been challenged by the SEC, which argued that Coinbase cannot demonstrate a right to relief and that mandamus is an extraordinary remedy.

The SEC also informed the court that while rulemaking for cryptocurrencies may take considerable time, the regulator will continue to rely on enforcement actions, which “may” yield information useful in future rulemaking that is not yet planned. The SEC argued that it should not be compelled into rule-making for the crypto industry as neither the securities laws nor the Administrative Procedure Act impose an obligation on the agency to issue broad new regulations concerning digital assets, as requested by Coinbase.

The SEC also argued that Coinbase cannot persuasively claim any harm resulting from it’s lack of action on the petition, and that it continues to consider the exchange’s petition in the normal course of its procedures. Interestingly, the SEC’s response also sought to distance the regulator from any public comments expressed by its chair, Gary Gensler, particularly regarding his statement that most cryptocurrencies are securities. The agency clarified that Gensler’s statements are not formal guidance or policy statements, and the public cannot rely on them as such.

Coinbase took the SEC to court two weeks ago with the goal of receiving a response to a rulemaking petition submitted back in July 2022, which centered on the classification of digital assets as securities and the existing registration and transparency requirements for such assets. As the legal battle continues, Coinbase’s lawsuit raises fundamental questions about the regulatory framework for cryptocurrencies and the need for clarity in the industry. Both Coinbase and the SEC remain engaged in a high-stakes confrontation that could have far-reaching implications for the broader crypto industry.

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