Paul Grewal, Coinbase’s chief legal officer, expressed his concerns about the SEC’s response, stating that they are willing to responsibly regulate and supervise the sector instead of relying solely on enforcement measures.
The U.S. Securities and Exchange Commission (SEC) has responded formally in court to Coinbase’s request for clear cryptocurrency regulations. The SEC stated that the process of establishing rules could take several years and emphasized that enforcement actions will persist during this period.
Based on court documents submitted on May 15, the SEC claimed that it is not obligated to fulfill Coinbase’s specified requirements mentioned in its petition. Additionally, the SEC argued that Coinbase has requested a complex set of reforms and rule-making within an unreasonably limited timeframe.
The securities regulator has requested the court to reject Coinbase’s petition for mandamus, stating that mandamus is an exceptional and unusual legal remedy, and that Coinbase fails to demonstrate a valid entitlement to relief.
In a series of tweets, Coinbase’s chief legal officer, Paul Grewal, remarked that the recent court filing may be the first instance where the securities regulator has shared its perspective on whether the SEC should establish regulations for the cryptocurrency industry. Grewal also highlighted that there are still many unresolved matters that require further clarification.
Today the SEC responded to Coinbase’s petition for a writ of mandamus — asking the court to require the SEC to respond just yes or no to whether it will undertake rulemaking for our industry. The SEC’s answer? A resounding maybe. 1/7
— paulgrewal.eth (@iampaulgrewal) May 16, 2023
Grewal further noted, “The SEC informed the court that the process of creating rules could be lengthy, and they are not in a hurry.”
Grewal also mentioned, “The SEC acknowledged that it will continue to rely on enforcement actions instead of immediate rulemaking, but assured that these enforcement actions might eventually provide insights for future rulemaking that is currently not yet planned.”
Just a few hours before the filing, SEC chief Gary Gensler gave a keynote speech at the Financial Markets Conference. He expressed his belief that there are already published rules for the cryptocurrency industry, which he considers to be adequate and satisfactory.
In an interesting development, the SEC, in its recent filing, made it clear that it does not align itself with the public comments and viewpoints expressed by its chair. This distinction seems to be primarily related to the comments made by Gary Gensler regarding his belief that a significant portion of cryptocurrencies can be classified as securities.
Grewal emphasized that the SEC also stated that the public statements made by Chair Gensler do not constitute official guidance or policy statements from the SEC. As a result, the public cannot rely on them as authoritative guidance.
Ultimately, the regulator has stated that it should not be forced or obligated to create specific rules for the cryptocurrency industry.
Excerpt from SEC’s response to Coinbase’s petition. Source: Courtlistener
The SEC stated that both the securities laws and the Administrative Procedure Act do not impose any obligation on the Securities and Exchange Commission to establish extensive new regulations concerning “digital assets,” as requested by Coinbase.
The SEC pointed out that Coinbase itself acknowledged the complexity involved in exploring the different options presented. However, the SEC highlighted that Coinbase submitted its rulemaking petition less than ten months ago, followed by additional supplements to the petition within three months, and even sought to supplement the record again just a few weeks ago.
The SEC argues that it should reject Coinbase’s petition because Coinbase cannot convincingly demonstrate any harm caused by the SEC’s inaction since the petition was first submitted.
The SEC also states that Coinbase cannot provide evidence that recent enforcement actions taken by the SEC imply a decision by the Commission to avoid rulemaking. The agency clarified that it is still reviewing Coinbase’s petition as part of its regular process.
Grewal argued that the SEC’s response reinforces Coinbase’s longstanding concern that the cryptocurrency industry lacks clear understanding of what falls within or outside the SEC’s authority. He further expressed the belief that the SEC’s stance may continue to evolve and change over time.
This information is for general knowledge only and should not be considered as advice for investing or making financial decisions
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