The U.S. exchange had formally petitioned the agency to start writing comprehensive crypto rules, but after “careful” consideration, the SEC said no.
- Coinbase has waited since 2022 for a response from the Securities and Exchange Commission on its formal petition to request tailored regulations for crypto, even seeking to force an answer through the courts, and the rejection has now arrived.
- The SEC says there’s no reason to craft a new regime for crypto, and that it’s already writing some targeted crypto rules and conducting enforcement actions under existing authorities, though two of the five commissioners disagreed.
- Coinbase said it’ll take the matter back to court.
U.S. crypto exchange Coinbase’s petition to the Securities and Exchange Commission (SEC) to prod it toward a system of tailored rules for digital assets was rejected by the regulator on Friday.
“The existing securities regime appropriately governs crypto asset securities,” said Chair Gary Gensler, in a statement issued with the denial. Besides arguing that the SEC has sufficient authority in today’s laws, he said the industry watchdog has already been engaging in rule proposals to directly regulate crypto businesses, and its enforcement division has also been able to address wrongdoing.
Gensler made a third argument, too, that “it is important to maintain commission discretion in setting its own rulemaking priorities.”
Coinbase had applied this formal pressure in 2022, before it was itself sued by the SEC as an unregistered securities exchange. Earlier this year, the company had asked a federal court to force a response from the agency, which has now arrived.
“The commission disagrees with the petition’s assertion that application of existing securities statutes and regulations to crypto asset securities, issuers of those securities, and intermediaries in the trading, settlement, and custody of those securities is unworkable,” the five-member commission concluded in its two-page response, which said the agency had given the request careful consideration. “The commission concludes that the requested rulemaking is currently unwarranted and denies the petition.”
Coinbase Chief Legal Officer Paul Grewal said the company will further challenge this rejection in court, calling the SEC’s decision an “abdication of its duty.”
“No one looking fairly at our industry thinks the law is clear or that there isn’t more work to do,” Grewal said in a statement.
Commissioners Hester Peirce and Mark Uyeda opposed the SEC’s denial.
“We hope that interested persons continue to posit specific rule changes, guidance, and exemptions that would form a useful basis for the crypto industry to continue its development within the United States,” the Republican commissioners argued in a statement. “While we are disappointed that the commission is not hosting these important conversations, we will have an open ear for conversations that others host and the ideas that emerge from those conversations.”
Grewal said that Coinbase is “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,” he said.
A footnote in Gensler’s statement argues that Coinbase’s own petition repeatedly refers to “digital asset securities” and the SEC’s authority over them, “thus acknowledging that crypto assets can be offered and sold as securities and subject to oversight by the SEC.”
Gensler had also noted – without naming Prometheum Inc. – that a crypto broker has used a special digital assets registration, suggesting this method of compliance is “workable.”
Seeking a wider, industry-specific system of regulations in the U.S. has been the leading priority of crypto lobbyists in Washington. So far, legislative efforts this year in Congress have made progress but failed to reach the finish line. While the SEC pushes back on the need for tailored rules on the securities side, the wider Financial Stability Oversight Council that includes the agency’s chairman as a member concluded in its annual report yesterday that crypto does need Congress to intervene with regulations.