The US Securities and Exchange Commission (SEC) has rejected Coinbase Global’s request for new regulatory frameworks aimed at overseeing the digital asset industry.
Coinbase, a prominent cryptocurrency exchange, had advocated for customized regulations within the crypto sector, arguing that the existing US securities laws were ill-suited to this burgeoning field.
In a letter addressed to Coinbase’s Chief Legal Officer, SEC Chair Gary Gensler expressed his disagreement with the assertion that the current securities regulations were impractical for the cryptocurrency sector.
Gensler’s statement, available on the SEC’s official website, underscored that the existing legal framework already applies to crypto securities markets.
He cited the Supreme Court’s flexible Howey test, which has effectively been used by federal courts to evaluate crypto assets.
He also refuted claims that identifying a crypto asset’s “issuer” was an insurmountable challenge, highlighting the importance of transparency and investor safeguards.
Chair Gensler further highlighted the SEC’s ongoing rulemaking initiatives designed to address the crypto securities markets.
Despite Coinbase’s assertion that the time was ripe for regulatory intervention, Gensler pointed to existing efforts, such as the Special Purpose Broker-Dealers Release, which offers a five-year grace period for broker-dealers engaged in crypto asset securities.
He also mentioned proposed rules and enforcement actions relating to crypto assets, emphasizing the necessity of adaptability in response to evolving market dynamics.
Gensler emphasized the significance of retaining Commission discretion to allocate resources efficiently and prioritize regulatory objectives.
While acknowledging the susceptibility of the crypto market to fraud and noncompliance, he emphasized that this sector constitutes only a small fraction of the broader $110 trillion capital markets.
This discretion empowers the SEC to concentrate its efforts on areas requiring updated regulations.
In conclusion, Gensler asserted that, despite the challenges, active involvement, registration, and compliance were imperative for safeguarding investors and maintaining market integrity.
The SEC’s decision to dismiss Coinbase’s petition aligns with the perspective that the current securities regulations are well-suited for crypto-asset securities, ensuring transparency and equitable conditions for industry participants.