Coinbase has accused the U.S. Securities and Exchange Commission (SEC) of employing a regulation-by-enforcement strategy to deliberately stifle the cryptocurrency industry.
In a May 31 filing with the U.S. Court of Appeals, Coinbase critiqued the SEC’s reluctance to establish clear and equitable regulations for the crypto sector, which they argue is intended to “choke” the industry’s growth.
In the document, Coinbase expressed frustration with the SEC’s approach, stating, “The SEC is serious about the destruction of digital assets.”
The filing highlighted the agency’s apparent disinterest in negotiating fair rules, noting that giving the SEC more opportunities to clarify its position would be “both pointless and exquisitely undeserved.”
Coinbase also argued that the SEC does not see it as its responsibility to ensure compliance is feasible, claiming that the agency finds its current rules “workable enough” as evidenced by its litigation against various firms for rule violations.
This stance was reinforced by the mention of other SEC Commissioners who agree that the SEC’s actions are detrimental to the progress of digital assets and innovation.
The situation has been further complicated by legal actions the SEC has taken against firms like Coinbase. In June 2023, the SEC sued Coinbase for operating without proper registrations as a broker, securities exchange, or clearing agency.
Despite efforts to dismiss the lawsuit, Coinbase has faced opposition from the SEC at every turn.
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Even with a forecast by Bloomberg’s senior litigation analyst Elliott Stein, suggesting a 70% likelihood of a full dismissal, the case remains unresolved.
Amidst these tensions, SEC Commissioner Hester Pierce has proposed solutions like a cross-border sandbox program to facilitate cooperation between U.S. and U.K. firms experimenting with tokenized securities.
During a panel at Consensus 2024, Pierce criticized the SEC’s unyielding bureaucracy, noting, “One of the problems that we’ve had is that people have tried to come into the SEC to get relief, but, you know, you sort of come in, and nothing happens.
“This would […] force the SEC’s hand a little bit.”
While Coinbase acknowledges that the SEC’s stringent rules might only affect a small portion of the market, it argues that the overall approach remains oppressive.
The company and other stakeholders in the crypto industry continue to push for fairer regulatory treatment as the SEC maintains its stringent stance.
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