Coinbase says SEC is ‘suppressing’ the cryptocurrency industry

Coinbase has intensified its efforts to ask the U.S. Securities and Exchange Commission (SEC) to initiate formal rulemaking regarding digital assets.

In its May 31 summary, the cryptocurrency exchange called on the appeals court to force the financial regulator to establish clear regulations for the emerging industry.

Coinbase Questions SEC’s Regulatory Approach

Coinbase says the SEC’s enforcement strategy leaves crypto companies in a “Catch-22.” The exchange claims that the SEC is demanding an overly broad interpretation of its authority while aggressively pursuing legal proceedings against companies. Coinbase argues that the SEC is overstepping its bounds by imposing major policy changes through punitive measures.

In its letter, Coinbase argues that the SEC’s approach violates the Administrative Procedure Act (APA), which requires rulemaking in the event of significant policy changes. The document highlights that the SEC’s inconsistent digital asset policies lack consistent regulatory standards, making regulatory compliance unfeasible for the industry.

“The SEC used a regulatory enforcement approach to assert broad, if ill-defined, jurisdiction over a new and dynamic industry without first expressing its understanding of the law through regulations vetted through public and judicial comments prior to enforcement review,” Coinbase said.

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Moreover, Paul Grewal, Coinbase’s chief legal officer, reiterated this position on social media, emphasizing the importance of the legal battle. He argued that the Commission did not provide substantive justification for rejecting the company’s call to introduce regulations tailored to individual needs. Instead, Grewal said the SEC was overstepping its authority without congressional authorization and establishing clear rules for the emerging digital asset industry.

“Interestingly, the SEC says – over and over again – that it doesn’t matter whether the industry can comply with the regulations. “The SEC wants to suppress the digital asset industry and refuses to provide the necessary rules the industry has asked for to tighten its stranglehold,” Grewal said.

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Coinbase filed a regulatory petition against the SEC two years ago. Initially not responding to the petition, the regulator said it could not be forced to create specific rules for cryptocurrencies. However, Coinbase and other cryptocurrency stakeholders have consistently maintained that the lack of rules is hurting the industry. The outcome of this legal battle could significantly impact the future of digital assets in the U.S., impacting regulation for years to come.