Coinbase has spear a formal appeal against the United States Securities and Exchange Commission (SEC), criticizing the regulator's denial of its rulemaking request and challenging the SEC's authority over the digital assets space.
In a series of posts, Paul Grewal, Coinbase's chief legal officer, highlighted the company's frustration with the SEC's “shallow denial” and lack of clear justification.
He highlighted the inconsistency of the SEC's position regarding its regulatory authority over digital assets.
The SEC's evolving position and the Coinbase challenge
For years, the SEC has recognized its limited authority in digital assets, prompting Congress to grant it broader regulatory powers.
However, Coinbase claims that the SEC abruptly asserted broad authority and launched a broad enforcement campaign against the crypto industry, frequently changing its legal interpretations.
Grewal emphasizes that any assertion of new authority by the SEC should be accompanied by a formal rulemaking process. This is a step that the SEC skipped, leading to what Coinbase considers a “disjointed regulation by enforcement” approach.
Legal and practical complexities
The appeal of Coinbase demonstrates the practical difficulties of applying traditional securities regulations to digital assets, which are inherently settled without physical delivery of securities certificates.
The brief argues that treating all entities involved in digital asset transactions as “clearing agencies” under these conditions is unfeasible, particularly for decentralized blockchain components that operate autonomously.
Coinbase claims that this lack of a clear regulatory framework not only hinders the operation of existing digital asset laws, but also fails to provide necessary guidance to the industry. This undermines the legal and operational foundations of the digital asset market.