On May 15th, new developments emerged in an ongoing dispute between the US securities regulator and crypto exchange Coinbase.
The US Securities and Exchange Commission (SEC), an independent agency of the United States federal government tasked with enforcing the law against market manipulation, has formally responded to Coinbase's petition for clear crypto regulations, suggesting that the process might take years while enforcement actions continue.
According to the documents filed to the court on May 15th, the SEC has asserted that it is not bound to fulfill Coinbase's demands, which allegedly involve a complicated set of regulatory reforms within an unrealistic timeframe.
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The regulatory body has urged the court to dismiss Coinbase's call for mandamus. The SEC contends that Coinbase has failed to establish a valid claim for relief under this legal provision.
Coinbase's chief legal officer (CLO), Paul Grewal, took to Twitter to discuss the SEC's filing. According to him, this might be the first instance of the SEC explaining its stance on whether it should establish regulations for the crypto sector.
Grewal pointed out that the SEC claims the rulemaking process could take years, and the regulator isn't in a hurry. He further stated:
The SEC conceded that it would keep utilizing enforcement actions in place of rulemaking for the time being. But there's no cause for alarm — those enforcement actions might eventually shape the yet-to-be-planned rulemaking.
Interestingly, just hours prior to the SEC's filing, its Chair, Gary Gensler, stated in a keynote speech at the Financial Markets Conference that the existing rules for the crypto industry were sufficient.
In its court documents, the SEC kept a careful distance from any public remarks made by its Chair, especially those related to Gensler's belief that most crypto qualifies as a security. In his Twitter thread, Grewal noted:
The SEC also clarified that Chair Gensler's public statements don't represent the SEC's formal guidance or policy, and as such, the public shouldn't rely on them.
In essence, the SEC argued against being forced into creating rules for the crypto industry. It stated that neither the securities laws nor the Administrative Procedure Act obligates the SEC to develop the broad 'digital assets' regulations that Coinbase is asking for.
At the end of his Twitter thread, Grewal argued that SEC's response only proves that securities regulators haven't made their minds up about how to regulate the crypto industry.
The SEC's response only strengthens Coinbase's long-held concern that there is no clarity in our industry about what the SEC might consider within or outside its jurisdiction at any given time, and it is likely to keep changing its mind.
It is worth noting that at the end of April, Coinbase took legal action to force SEC to respond to its petition, which has been lingering since July 2022.
