Coinbase, a prominent crypto exchange, asserts that the U.S. Securities and Exchange Commission (SEC) is taking a detrimental enforcement-centric stance, which is having adverse effects on America.
In Coinbase’s view, while most major global economic powers are embracing technology that can bolster economic opportunities, the SEC’s reliance on enforcement-driven regulations is causing the loss of millions of jobs in the United States and driving potential opportunities abroad.
Brian Armstrong, the CEO of Coinbase, strongly opposes the Commodity Futures Trading Commission’s (CFTC) enforcement actions against decentralized protocols in the realm of Decentralized Finance (DeFi). Consequently, Armstrong is urging the DeFi community to take legal action against the CFTC.
Referring to recent enforcement actions initiated by the Commodity Futures Trading Commission against several operators of decentralized finance protocols, Coinbase’s CEO, Brian Armstrong, expresses his hope that these protocols will set a precedent by challenging the regulator in court. Armstrong makes the following statement on his X account:
“The CFTC should refrain from pursuing enforcement actions against decentralized (DeFi) protocols, as they do not qualify as financial services businesses. Furthermore, it’s doubtful that the Commodity Exchange Act even applies to them. My expectation is that DeFi protocols will establish a legal precedent by litigating these cases. The courts have consistently demonstrated a commitment to upholding the rule of law.”
Coinbase highlights that the SEC’s enforcement-centric approach persists, despite SEC Chair Gary Gensler testifying before the U.S. House Committee on Financial Services in May 2021, stating that domestic crypto exchanges lacked a regulatory framework at both the SEC and the U.S. Commodity Futures Trading Commission (CFTC).
During a recent interview, CEO Armstrong voiced his concerns regarding Gary Gensler’s role as SEC Chair and suggested that the regulatory dispute might be resolved with a change in leadership, possibly in 2024.
According to Coinbase, the enforcement-centric approach persists, even though 9 out of 10 Americans believe it’s time to modernize the financial system to promote fairness and prevent progress from being hindered by the status quo. Furthermore, this approach continues despite the fact that 52 million people, or 1 in 5 Americans, own cryptocurrency, and courts have ruled against the SEC in various high-profile cases, including the Grayscale case where the court found the SEC’s actions to be “arbitrary and capricious.”
In recent developments, the CFTC settled charges against DeFi protocols Opyn, ZeroEx, and Deridex. These settlements involved fines of $250,000, $200,000, and $100,000 for Deridex, Opyn, and ZeroEx, respectively. The charges included failure to register as a clearing execution facility or designated contract market, failure to register as a futures commission trader, and failure to adopt a customer identification program in compliance with the Bank Secrecy Act. Additionally, Opyn and Deridex were accused of offering leveraged and margined individual commodity transactions in cryptocurrency without proper authorization.
Coinbase advocates for a legislative approach as the “optimal path” forward. Despite the SEC’s emphasis on enforcement, Congress is taking steps to advance comprehensive crypto legislation. These efforts are crucial to ensure that the United States does not lag behind other jurisdictions. A legislative approach to crypto regulation is seen as the best way to ensure consumer protection while also retaining digital asset innovation and associated job opportunities within the United States.