SEC Rejects Coinbase's Request for Crypto-Specific Securities Regulation
Summary:
The United States Securities and Exchange Commission (SEC) has declined a request from Coinbase for rulemaking concerning cryptocurrencies that qualify as securities. Gary Gensler, SEC's chair, justified the rejection on three grounds: the applicability of current regulations to crypto, inopportune timing given ongoing public consultations on crypto rules, and the agency's discretion in setting its regulatory agenda. Two SEC commissioners expressed their disagreement, suggesting that the implications of the petition merited thorough consideration.
In a December 15 statement, Gary Gensler, the chair of the Securities and Exchange Commission (SEC) in the United States, conveyed the agency's decision to turn down a request made by Coinbase to establish a rule concerning the handling of cryptocurrencies that are classified as securities. Coinbase's plea for the initiation of this rule was submitted in July 2022, and it advocated for the creation of guidelines for managing securities that are acquired and exchanged through digital means, along with the potential formulation of rules to distinguish which digital assets qualify as securities.
In justifying the refusal, Gensler pointed out three reasons. The first reason emphasized that the laws and regulations currently in place are already relevant to cryptocurrencies. Specifically, Gensler stated that the protection provided by existing securities laws should not differentiate between regular and crypto securities investors or issuers.
Despite anticipating Gensler's argument and including references to the Howey test and Reves decision – two important aspects of current securities law – in their petition, Paul Grewal, the chief legal officer of Coinbase, did not succeed in making a case for the new regulations.
Gensler's seconds reason argued that the timing wasn't right for the proposed rule. With the SEC currently engaged in collecting public feedback on crypto applicable regulations, Gensler felt this wasn't the ideal time for implementing Coinbase's suggested rule.
Lastly, Gensler asserted that the formulation of rules is at the discretion of the agency, and timing and priorities are crucial aspects. Two SEC commissioners, Hester Peirce and Mark Uyeda, publicly disagreed with the decision, stating that the matters raised in the petition deserved consideration and broader discussions involving various market participants.
In total defiance of the SEC's decision, Coinbase, nine months post-initial petition, sought a court mandate requiring the SEC to provide a response. A notice was issued to Coinbase warning of potential legal actions from the SEC. In response, the SEC maintained that Coinbase was not entitled to a mandate and that creating a rule could take years. After further legal proceedings, the SEC pledged to respond to the Coinbase petition by December 15.
Published At
12/15/2023 9:15:00 PM
Disclaimer: Algoine does not endorse any content or product on this page. Readers should conduct their own research before taking any actions related to the asset, company, or any information in this article and assume full responsibility for their decisions. This article should not be considered as investment advice. Our news is prepared with AI support.
Do you suspect this content may be misleading, incomplete, or inappropriate in any way, requiring modification or removal?
We appreciate your report.