Cryptocurrency exchange Coinbase filed a lawsuit against the US Securities and Exchange Commission (SEC) late Monday over its securities guidelines and whether or not this extends to the crypto industry.
The legal action taken stems from a petition filed by Coinbase back in July 2022 which asked the SEC to provide specific guidelines and regulations on financial securities and if they are applicable to cryptocurrency tokens.
Whilst the SEC believes this to be the case, using this ruling to investigate multiple exchanges over the last several months, including Coinbase, the US financial regulator did not send any note of public response to Coinbase over the petition.
The petition stated that the “US does not currently have a functioning market in digital asset securities due to the lack of a clear and workable regulatory regime. Digital assets that trade today overwhelmingly have the characteristics of commodities”.
Moreover, even with no response to the July 2022 petition, the SEC filed a Wells Notice to Coinbase last March to inform them they may fall under an investigation in regards to alleged unregistered securities.
This appears to have ultimately proved to be the final straw for Coinbase in their efforts in regulatory discussions with the SEC, and will now seek legal measures to gain the regulation answers they desire.
Paul Grewal, Coinbase Chief Legal Officer, stated: “From the SEC’s public statements and enforcement activity in the crypto industry, it seems like the SEC has already made up its mind to deny our petition. But they haven’t told the public yet.
“So the action Coinbase filed today simply asks the court to ask the SEC to share its decision.”
Coinbase’s intention to begin crypto regulation discussions has been welcomed by Fergal Parkinson, Director of TMT Analysis, who believes the ‘tide has turned’ in regards to crypto regulation in the US, after months of heated battles between the exchanges and the SEC.
He commented: “The fact that Coinbase is so strongly lobbying for regulation suggests that the tide has turned and crypto firms are increasingly aware of how crucial legislation is to the success of the industry. This is a hugely significant step and the world is watching for the SEC’s response.
“The SEC – alongside other global regulators – needs to implement crypto legislation to allow the industry to fulfil its potential as a truly viable, global alternative to the current monetary system and offer consumers increased choice at a time when global inflation remains rampant.
“To give people the confidence to make an investment and continue to grow the market, firms need to introduce a more stringent anti-fraud process, whether SEC legislation is incoming or not. Measures such as number verification are a simple yet vital step in fighting fraud and boosting consumer confidence in the market.”