The United States Securities and Exchange Commission (SEC) has responded to Coinbase’s petition, seeking a regulatory framework tailored to the crypto market, stating that the regulatory petition is “unwarranted.”
However, two out of five commissioners disagreed with the decision, saying the agency should engage in extensive public discussions that could result in the development of rules or guidance.
Gary Gensler: Existing Securities Laws Applied to Crypto
The SEC, in a letter to Coinbase General Counsel Paul Grewal on December 15, 2023, said he objected to the petition’s assertions that existing securities laws were “unworkable” for crypto securities markets, emphasizing that ” the requested regulatory measure would considerably limit the Commission’s competition choices.” priorities. »
An excerpt from the letter says:
“The Commission has carefully considered this recommendation, as well as the petition and comment letters. After this review, and in exercising its broad discretion in setting its regulatory agenda, the Commission concludes that the requested regulations are currently unwarranted and denies the petition.
SEC Chairman Gary Gensler supported the Commission’s response to Coinbase’s rulemaking petition, outlining three reasons why it was satisfied with the denial.
He said existing securities regulations applied to crypto, with the president adding that the Howey test, which the agency habitually applied in various enforcement actions, was “flexible” and “able to adapt to meet to the countless and variable schemes designed by those who seek to use other people’s money on the promise of profits.
“Thus, to the extent that crypto assets are offered and sold in the form of an investment contract, and to the extent that entities engage in intermediary transactions in securities of crypto assets, the federal securities laws securities apply.”
The SEC Chairman further emphasized that the Commission exercises discretion on how to prioritize its regulatory agenda and use its resources. According to Gensler, the cryptocurrency market represents only a small percentage of the billions in capital markets.
“While the crypto market faces fraud, abuse, and non-compliance out of proportion to its size, it nonetheless represents only a small portion of the $110 trillion-plus capital markets. . It is important that the Commission retains its discretion to focus on those parts of the capital markets that require updated regulation.
Hester Peirce and Mark Uyeda disagree with SEC decision
While Gensler applauded the SEC’s decision, commissioners Hester Peirce and Mark Uyeda were disappointed to the agency’s response.
In a statement responding to the SEC’s denial, Peirce and Uyeda noted that it was important for the SEC to engage in dialogue with market participants and other interested parties to resolve the issues raised in the rulemaking petition.
Coinbase’s Paul Grewal also seemed unhappy with the Commission’s response, saying: “No one who looks fairly at our industry thinks the law is clear or that there is more work to be done.” Grewal, meanwhile, said the crypto exchange would resort to the Third Circuit to challenge the SEC’s “abdication of its duty.”
The US-based cryptocurrency exchange filed a rulemaking petition in July 2022, asking the SEC to come up with clearer regulatory policies for the industry.
However, America’s top regulator did not respond to the petition until Coinbase, in April 2023, filed a writ of mandamus compelling the agency to issue a response. Grewal, at the time, speculated that the SEC might reject the rulemaking request.
Meanwhile, Coinbase is embroiled in a legal battle with the SEC after the latter accused the crypto company of operating an unregistered exchange and listing assets on its platform considered securities.
Binance Free $100 (Exclusive): Use this link to sign up and receive $100 free and 10% off fees on Binance Futures for the first month (terms).