On Monday, the SEC issued its response to Coinbase’s July 2022 petition, after the latter filed a lawsuit. Nevertheless, the response turns out to be a “resounding maybe”, in the words of Paul Grewal, Coinbase’s general counsel.
SEC responds to Coinbase
In July 2022, Coinbase had petitioned the Securities and Exchange Commission (SEC) in an attempt to bring greater regulatory clarity to cryptocurrencies in the US. After numerous meetings, these exchanges appear to have run their course in January after the US regulator cancelled a meeting.
After receiving a Wells opinion last March, and faced with the SEC’s repressive measures towards the industry as a whole, the exchange opted for legal action to force the institution to remove its legal vagueness.
The SEC had until Monday to respond, which it did in its own way. According to the SEC, Coinbase is under no obligation to force its hand, and so it is through a 36-page document that the financial watchdog clears its name, arguing that it did not have to justify the slowness of its regulatory process.
The concluding sentence alone sums up the position of the Securities and Exchange Commission, which does not seem ready to change the offensive stance it adopted several months ago now:
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“That Coinbase wants its policy preferences addressed immediately does not entitle it to extraordinary relief ordering the Commission to act on a rulemaking petition that has been pending for less than a year. “
The arguments against these delays
In its argument, the SEC believes that mandamus is an “extraordinary remedy” requiring “a showing of a clear and indisputable right to relief”, which Coinbase would not make.
In addition, the regulator cites several examples of various cases involving mandamus in which the courts had ruled in favour of the defence, even though the proceedings had lasted much longer than the 10 months since Coinbase filed its petition.
In addition, the SEC adds that its rules do not impose a time limit on requests for regulatory changes.
Given the complexity of the legal updates involved, the Commission maintains that this will be a lengthy process.
For his part, Paul Grewal, Coinbase’s legal director, deplored this attitude in a Twitter thread, saying that it only reinforced the industry’s concerns about the lack of clarity:
Overall the SEC’s response reinforces Coinbase’s longstanding concern that our industry does not have clarity on what the SEC may consider to be within or outside its jurisdiction at any time, and it is likely to continue changing its mind along the way. 6/7
– paulgrewal.eth (@iampaulgrewal) May 16, 2023
Paul Grewal also revealed that Coinbase was “looking forward to the opportunity to respond officially next week”.
At the same time, the platform is accelerating its compliance work in other jurisdictions around the world, such as Bermuda and the United Arab Emirates. This demonstrates a desire to diversify in order to capture market share outside the United States, which is proving less and less welcoming to the ecosystem.
