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The U.S. Securities and Exchange Commission (SEC) denied a petition from Coinbase Global requesting the creation of new rules for the digital asset sector. The decision underscores the ongoing debate over the regulatory framework for the rapidly evolving crypto space. Coinbase is the largest crypto exchange in the United States.
Coinbase had urged the SEC in 2022 to establish tailored regulations for the crypto sector, arguing that existing U.S. securities laws were insufficient for effectively overseeing the nascent industry. However, SEC Chair Gary Gensler consistently rebuffed these claims.
Facing a lack of response from the SEC, Coinbase took legal action in April 2023, filing a lawsuit against the agency and seeking a court order to compel a response to its petition. The SEC’s decision, communicated in a letter to Coinbase’s chief legal officer Paul Grewal on Friday, asserted that current securities regulations and laws are applicable and not “unworkable” for the crypto sector.
In a statement supporting the decision, SEC Chair Gary Gensler emphasized, “Existing laws and regulations apply to the crypto securities markets.” This stance aligns with the Commission’s commitment to treating crypto securities with the same level of protection as traditional securities.
The denial comes at a critical juncture for Coinbase, which is not only grappling with the SEC’s rejection of its rulemaking petition but is also preparing to contest separate charges brought by the SEC. The regulatory body accuses Coinbase of operating as an unregistered securities exchange, clearing agency, and broker.
Coinbase, a major player in the crypto space globally, had hoped for regulatory clarity through a custom rulemaking process. The SEC’s decision, however, sets the stage for a legal showdown in 2024. Coinbase is scheduled to present its case before a federal judge on January 17, challenging the SEC’s charges and defending its position that the tokens listed on its exchanges are not securities.
As the crypto industry continues to gain prominence, the outcome of Coinbase’s legal challenges could have broader implications for the regulatory landscape of the entire cryptocurrency market.
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