The United States Securities and Exchange Commission and Coinbase, the largest cryptocurrency exchange in the country, are now engaged in a contentious legal dispute.
Coinbase claimed this week in a court filing that the regulatory body is refusing to give the cryptocurrency industry clear regulations, instead placing those firms in a “Catch-22” predicament. According to Coinbase, Gary Gensler, the SEC chairman, is requesting that cryptocurrency firms register with the organization in order to avoid “enforcement actions” or “punitive sanctions.”
But the SEC refuses to issue regulations that would let the market know the SEC’s criteria for deciding whether digital assets may qualify as securities or offer a practical way to register when necessary, according to Coinbase.
In an effort to gain “clarity and certainty” regarding the general regulations governing the business, the company claims to have submitted 50 queries to the regulator. It even explicitly requested clear rules last summer.
According to Coinbase, this would not only protect businesses from the SEC’s enforcement activities and decisions that appear to be made arbitrarily, but it would also allow the sector to function legally. The company criticized the unequal treatment of cryptocurrency firms, where some are subjected to harsh regulatory measures while others are simply disregarded by the authority.
In the past, the SEC chairman has classified some cryptocurrencies, such as Bitcoin, as commodity, not a security, which theoretically means that it is outside the authority of his organization. But given the variety of cryptocurrencies available for purchase, sale, and trading on crypto exchanges like Coinbase, regulatory clarification is necessary to prevent them from violating U.S. securities laws.
The SEC has generally urged the public to use caution when making investments in cryptocurrencies and has called attention to the high risk and volatility involved with the sector. It stated in March that crypto companies “may not be complying with applicable law, including federal securities laws.”
The lack of regulatory clarity in the United States was contrasted by Coinbase with the effective regulatory efforts being made throughout the world, particularly in Europe with the recently implemented crypto rules known as Markets in Crypto-Assets Regulation, or MiCA.
In its filing, Coinbase noted that the SEC was essentially telling the cryptocurrency industry to “[wait] for the government to sue them,” which was an untenable stance for budding crypto firms that might not withstand harsh punishment by enforcement.
The business declared that “new standards of this magnitude must be made through rule-making — not ad hoc enforcement campaigns.”
