According to Coinbase Chief Legal Officer Paul Grewal, the crypto exchange is contesting the Securities and Exchange Commission’s decision to deny its request for new digital asset regulation.
Earlier in the day, the SEC rejected Coinbase’s long-standing request for new regulations, calling it “unwarranted.”
“Today, the SEC denied Coinbase’s petition for crypto rules,” Grewal wrote on X. “We went to court after 18 months of silence to get the response the law requires.” With gratitude to the Third Circuit, we will seek its assistance again later today to challenge the SEC’s abdication of its duty.”
We’re grateful that two Commissioners disagreed with the denial and called for real dialogue. We should be working together to create laws and rules that will benefit consumers and US innovation, not defending lawsuits based on legal positions that change month after month.
— paulgrewal.eth (@iampaulgrewal) December 15, 2023
Coinbase and the SEC have been at odds since the exchange requested new rules in 2022. Grewal stated that Republican SEC Commissioners Hester Peirce and Mark Uyeda disagreed with the denial and emphasized the between regulators and the cryptocurrency industry.
“We’re grateful that two Commissioners disagreed with the denial and called for real dialogue,” Grewal said in a statement. “We should be working together to create laws and rules that will benefit consumers and U.S. innovation, not defending lawsuits based on legal positions that change month after month.”
Later that day, Coinbase filed a petition for review in the United States Court of Appeals for the Third Circuit, requesting that the court determine whether or not the SEC’s move to deny the exchange’s application was justified its petition for rulemaking was proper.
“Coinbase’s mandamus petition thus has now achieved its stated purpose of compelling the SEC to act on Coinbase’s request for rulemaking,” according to the document filed with the SEC. “The Commission’s formal denial of that request confirms what its words and actions have long indicated was the Commission’s position.” By doing so, the SEC has cleared the way for judicial review that had previously been obstructed by its unexplained inaction.”
The actions of the SEC
The agency has not proposed crypto-specific rules, but has put forward some rulemakings that would apply to the industry over the last year. The SEC, for example, reopened a custody rule that would require registered investment advisors to keep cryptocurrency with a qualified custodian and subject those custodians to certain requirements.
Over the past year, the SEC has also taken enforcement actions, including one against Coinbase for operating as an unregistered exchange, which is still ongoing. Coinbase has stated that the judge should dismiss the case.
The SEC’s responsibility includes determining how to allocate resources, according to SEC Chair Gary Gensler on Friday. He emphasized that the cryptocurrency market is small in comparison to the rest of the capital markets that the agency regulates.
“While the crypto market experiences disproportionate fraud, abuse, and noncompliance in comparison to its size, it remains a minor component of the larger-than-$110 trillion capital markets.” “It is critical that the Commission retains the flexibility to focus on which aspects of the capital markets require updated regulation,” Gensler said.