Coinbase has renewed its push for the Securities and Exchange Commission (SEC) to act on its long-standing petition regarding digital asset classifications. The latest developments highlight an escalating tension between the two entities as regulatory scrutiny intensifies in the cryptocurrency sector.
SEC’s reluctance to act
In a recent filing submitted to a Manhattan federal court, Coinbase accused the SEC of displaying a “troubling intransigence” for not taking action on its petition filed in July of last year. The exchange is demanding clarity on which digital assets fall under the purview of securities. Eugene Scalia, Coinbase’s external counsel, said this inaction places the digital asset industry in an unparalleled Catch-22 situation. Moreover, he criticized the SEC for its “bureaucratic pantomime,” stating that the agency shows no intent of taking its request seriously.
The SEC, for its part, has delayed the issue. Despite being granted an extension by the court in June, the regulatory body has yet to provide clear guidelines. Significantly, the SEC sued Coinbase on June 6, alleging it functioned as an unregistered securities exchange. Consequently, the Third Circuit of the U.S. Court of Appeals has ordered the SEC to disclose its stance on denying or accepting Coinbase’s petition.
Regulatory confusion worsens
Gary Gensler, the SEC’s chairman, insists that existing laws offer enough guidance for digital asset companies. However, Scalia argues that the agency’s latest response to Coinbase is both inadequate and deliberately evasive. Scalia also pointed out that the SEC’s Division of Corporate Finance has contradicted itself by first asking Coinbase CEO Brian Armstrong to include a particular disclosure and later asking for its removal. This level of inconsistency only adds to the ambiguity surrounding digital asset regulation.
In addition, Scalia has urged the court to force the SEC to publicize its recommendation on Coinbase’s rulemaking petition within 30 days. The counsel argues that the Commission’s staff have already acted, and it’s high time for the SEC to follow suit. Besides putting pressure on the SEC, this move also underlines the ongoing struggle companies face while navigating the murky waters of cryptocurrency regulations.
Coinbase’s recent court filing is an exercise in urgency. The cryptocurrency exchange wants the SEC to act promptly or the courts to force it to act. Besides being a critical matter for Coinbase, the case serves as a litmus test for how regulatory bodies like the SEC will engage with emerging technologies. Hence, all eyes are now on the SEC to see if it will break its cycle of inaction and provide the guidance that digital asset companies seek.
