In a recent turn of events, the U.S. Securities and Exchange Commission (SEC) has responded to Coinbase’s request for action, delivering a resounding “no” to the cryptocurrency exchange’s proposals. The decision comes as a blow to Coinbase, one of the largest players in the digital asset market, and has sent shockwaves through the crypto community.
The Securities and Exchange Commission has responded to Coinbase’s request for regulatory clarity for the cryptocurrency industry. In April, Coinbase filed a mandamus petition demanding federal courts to instruct the SEC to issue clear guidelines for crypto exchanges and companies.
SEC challenges Coinbase’s Mandamus request &timeline demands
In its released response on Monday evening in New York, the SEC argued that Coinbase lacks the authority to request a mandamus, an order directing a government agency to carry out specific obligations.
Acknowledging this, the SEC stated in its response, “Coinbase, instead, contends that this Court should compel the Commission to take action on its recently submitted rulemaking petition. However, there is no legal requirement for the Commission to adhere to a specific timeline or take such action as mandated.”
The SEC’s response indicates that only a few months have passed since Coinbase initially filed its petition and an even shorter duration since Coinbase provided additional information to support its case.
SEC highlights the time-intensive nature of evaluating
The SEC further emphasized that considering the substantial changes proposed by Coinbase, which have the potential to impact both crypto assets and the securities markets, necessitates a thorough deliberation process. This includes evaluating whether or not to initiate a rulemaking proceeding regarding such matters. The SEC noted that this process requires sufficient time, especially given the Commission’s existing regulatory and enforcement priorities in the crypto industry.
Advocates for the crypto industry may contend that under Gary Gensler’s leadership, the SEC has been quite active, taking various actions against not just crypto projects but also exchanges. Some entities have opted not to contest the SEC’s actions, including Kraken, which resolved a dispute over its staking service. Despite this, Coinbase has maintained that it possesses both the capacity and the resolve to pursue regulatory clarity.
Coinbase’s lawsuit triggered by Wells notice on wallet and prime services
In response to a Wells Notice received by Coinbase in March 2023, the exchange initially filed a lawsuit. The Wells Notice serves as a precursor to potential regulatory enforcement actions by the SEC and specifically addresses concerns raised by the agency regarding Coinbase’s Wallet and Prime services.
In the previous month, Coinbase filed a lawsuit against the SEC, alleging that the agency has been unresponsive and unreasonable in delivering a timely response. Additionally, the exchange is requesting a formal notice-and-comment procedure that would enable public participation and input on the matter.
In the court filing submitted on Monday, May 15, the SEC dismissed Coinbase’s allegations as “baseless.” The legal representatives of the Commission stated in their filing:
“Coinbase’s preference for faster or different regulatory action by the commission does not entitle it to extraordinary relief from this court. The petition should be denied.”
SEC responds to Coin Base’s rulemaking petition
According to the filing, the rulemaking petition submitted by Coinbase requests the Commission to undertake discretionary measures, replacing the existing securities laws and regulations with a comprehensive new regulatory framework for trading securities-backed crypto assets.
In recent times, the SEC has taken stringent actions against numerous crypto firms, targeting prominent industry participants like Coinbase, Kraken, Binance, and other major players.
The SEC concludes by asserting that Coinbase’s desire for immediate attention to its policy preferences does not grant it extraordinary relief, compelling the Commission to take action on a rulemaking petition that has been pending for less than a year.
The SEC has responded negatively to Coinbase’s request for regulatory action, rejecting the exchange’s proposals. The lack of clear guidelines and the SEC’s focus on investor protection has led to challenges for crypto firms. The industry calls for collaboration and dialogue to establish a well-defined regulatory framework.