- The SEC has responded to Coinbase’s demand for crypto regulations clarity
- The agency has said that rulemaking in the crypto space could years, but enforcement action will continue
- The response was ordered by the court and will not please the crypto space
The Securities and Exchange Commission (SEC) has responded to Coinbase’s demand for clarity over crypto regulation with a “resounding maybe”, according to Coinbase’s legal head Paul Grewal. The exchange demanded that the SEC say once and for all if it intends to offer clear guidance to crypto companies in the US, and a response was forthcoming yesterday. Perhaps unsurprisingly, it wasn’t one that satisfied Grewal, who summarized the SEC’s position as being that “rulemaking may take years and they’re in no rush.”
Enforcement, but No Rules
Coinbase had argued that the SEC has not provided adequate regulatory guidance for US-based companies in the crypto industry, telling the United States Court of Appeals for the Third Circuit that the commission must “at a minimum, outline how irrelevant and unsuitable requirements should be modified for digital assets.” The court agreed that the SEC should reply to a petition filed by Coinbase in 2022 which requested official rulemaking in the digital assets sector, giving it 10 days to do so.
The SEC finally did so yesterday, but Grewal wasn’t impressed with its response:
Today the SEC responded to Coinbase’s petition for a writ of mandamus — asking the court to require the SEC to respond just yes or no to whether it will undertake rulemaking for our industry. The SEC’s answer? A resounding maybe. 1/7
— paulgrewal.eth (@iampaulgrewal) May 16, 2023
In summary, Grewal said, the SEC argued that “rulemaking may take years and they’re in no rush”, stating that the agency will continue to take legal action against those it believes have transgressed securities laws while it works on crafting those very laws itself. Grewal noted sarcastically that, “The SEC acknowledged that it will continue to use enforcement actions as a substitute for rulemaking for the foreseeable future, but not to worry — those enforcement actions may eventually “inform” not-yet-planned rulemaking.”
The SEC also made it clear that public comments by SEC Chair Gary Gensler are not policy and should not be considered as such, which means that Gensler can say one thing if he wants and the SEC can believe another.
Coinbase Can Reply
Needless to say, Grewal was not impressed with this response:
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.
Coinbase will reply to the response in the next week, and from Grewal’s comments we can assume it’s not going to be a glowing endorsement of the SEC’s approach of slow rulemaking but quick enforcement.