Cryptocurrency exchange Coinbase has filed a legal action to ask the US Securities and Exchange Commission (SEC) to clarify regulations for the crypto industry. The filing follows a July 2022 petition from Coinbase asking the SEC to use formal rulemaking to provide guidance for the crypto sector. Coinbase claims that the SEC has not yet responded to its petition, so it has filed the legal challenge to compel the SEC to respond either positively or negatively to its request.
The Administrative Procedure Act requires the SEC to respond to Coinbase’s rulemaking petition “within a reasonable time.” If the SEC decides not to respond, Coinbase will have the right to challenge that decision in court. Coinbase does not seek to dictate the SEC’s response, only to require that the agency responds at all, according to a statement released by the company.
Coinbase and other crypto firms are facing potential regulatory enforcement actions from the SEC, even though the agency has not stated its position on the application of the law to the crypto sector. Coinbase asserts that regulatory clarity is long overdue for the industry, and that new rules would be “a critical step to giving the public notice about what activities they can and cannot engage in.”
Coinbase said it recognizes that clear rules are needed for the industry and has asked for rules to be developed. The exchange’s decision to challenge the SEC is an attempt to compel basic rulemaking, according to the firm. Coinbase added that it will continue to take every step available to seek regulatory clarity until the industry gets that clarity.
Chief Legal Officer at Coinbase Paul Grewal said in a statement on Twitter that “The crypto industry, and its users need clear laws and rules to follow that are built for a new technology. Enforcement actions based in inapplicable securities law aren’t the answer.”
Coinbase has faced regulatory hurdles in the past, leading to it potentially seeking to move out of the United States. The exchange also halted plans to launch a lending product following warnings from regulators.