Coinbase is intensifying its call for the US Securities and Exchange Commission (SEC) to engage in formal rulemaking concerning digital assets. This request comes amidst a notable sale of Coinbase shares by Ark Invest, coinciding with the cryptocurrency market’s surge to unprecedented heights.
The legal clash between Coinbase and the SEC underscores the mounting tension within the cryptocurrency sector. In its court filing, Coinbase highlights the SEC’s significant shift in perspective toward digital assets. Initially, the SEC exercised minimal oversight over the digital asset realm, allowing crypto firms to operate with scant guidance. However, following the SEC Chair’s classification of most digital assets as securities, the Commission initiated a rigorous enforcement campaign.
Coinbase condemns this approach as a “power grab,” arguing that it places digital asset companies in a regulatory quandary, hindering their ability to comply with securities laws effectively. The firm contends that the SEC’s failure to articulate its position through formal rulemaking deprives companies of the opportunity to navigate regulatory requirements efficiently.
Paul Grewal, Coinbase’s Chief Legal Officer, expressed, “Even if the SEC believes it can lawfully assert new authority over digital assets today (it can’t), it must explain why in a rulemaking process and give the public a chance to understand and challenge that view. That hasn’t happened here, and yet it’s what the law requires. This type of disjointed regulation by enforcement approach to the crypto industry is harmful to American consumers and innovation alike.”
Despite submitting a rulemaking petition nearly two years ago, Coinbase’s efforts were rebuffed by the SEC in a brief response, highlighting the agency’s reluctance to adapt its regulatory framework to accommodate the digital asset sector.
Concurrently, Ark Invest divested $68.7 million worth of Coinbase (COIN) shares amidst a bullish cryptocurrency market. This move signals a shift in Ark Invest’s stance, particularly with Bitcoin and Ethereum reaching record highs. The sale underscores Coinbase’s significance in the crypto landscape and Ark Invest’s cautious stance amid regulatory uncertainties.
Ark Invest’s divestment coincided with technical challenges that led to a drop in Coinbase’s stock price last week. Coinbase CEO Brian Armstrong acknowledged the platform’s underestimation of traffic surges, reflecting operational hurdles.
As the SEC persists in its enforcement-centric approach to crypto regulation, Coinbase’s advocacy for rulemaking marks a critical juncture for the industry. The outcome of this legal battle could establish a precedent for how digital assets are regulated, shaping the market’s trajectory.
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