The regulator asserted that there is no justification for the exchange's demand for crypto regulatory clarity.
A few weeks ago, Coinbase exchange, the largest exchange in the United States, petitioned a federal appellate court in Philadelphia to demand regulatory clarity from the SEC regarding cryptocurrencies. Reports indicate that the SEC has petitioned another court to deny Coinbase's request.
The SEC stated in its court filing that it is not required to comply with the exchange's demands. It was added that Coinbase advocated for rulemaking and reforms that would take years to implement.
In addition, the regulator stated that the large exchange's request for a more transparent and distinct regulatory framework in a very brief period of time is unrealistic. The SEC stated that Coinbase's request does not prevent it from responding to its litigation.
The SEC Dismisses Coinbase's Legal Petition
The Securities and Exchange Commission reportedly refuses to address Coinbase's petition for rulemaking. In the meantime, the regulator is planning to investigate and sue the exchange platform for purportedly listing unregistered security tokens.
The petition filed by Coinbase in July 2022 requested that the SEC provide guidelines demonstrating how securities laws apply to cryptocurrencies. In addition, it requested that the regulator implement a formal notice-and-comment procedure so that the public could obtain the rules.
Moreover, in March of this year, Coinbase solicited the regulator's opinion on the concept of crypto staking and rewards earned from the action. However, the SEC refrained from addressing all of these petitions, citing the length of time required to reform regulations.
In addition, the agency stated that the procedure for drafting the requested regulations is complex. Therefore, the regulator argued that it was not required to complete the mission by any particular date.
Gary Gensler, the chairman of the SEC, alluded at the nature of financial market security a few hours before the filing of the petition. According to the Chairman, a security is any investment made by the general public with the expectation of profiting from the efforts of others.
The SEC, however, asserted that the Chairman's statements did not constitute official guidance or policy declarations. Consequently, it advised the public not to rely on them.
The Coinbase Responds to the SEC's Petition
Paul Grewal, the designated legal representative of Coinbase, tweeted his thoughts on the SEC's recent petition. It would be the first time the regulator would explain its stance on the industry's regulation, he said, if the SEC noted that the creation of crypto regulations takes years.
In addition, Grewal asserted that the SEC and its chairman appeared to have divergent perspectives regarding the securities concept. As most crypto assets are securities, the chairman asserted that crypto regulations already exist. The agency denies his claims, however.
Grewal continued by stating that the SEC's response to Coinbase's petition validates the exchange's assertions that crypto industry regulatory clarity would assist each crypto-related service provider in differentiating themselves and measuring their regulatory compliance level.
The relationship between the Coinbase exchange and the SEC has been rapidly deteriorating as of late. Brian Armstrong, the CEO of Coinbase, commented on the influence of the regulator's intense pressure on the exchange.
Armstrong stated that Coinbase may in the future contemplate relocating its operations to a more business-friendly environment, such as the Bahamas.