Coinbase’s Battle with the SEC: Accusations of Deliberate Destruction
Coinbase, one of the largest cryptocurrency exchanges, is engaged in a legal battle with the US Securities and Exchange Commission (SEC).
In its recent 36-page filing submitted to the Third Circuit Court of Appeals, Coinbase has urged the court to order the SEC to start drafting specific rules for cryptocurrencies. The platform argues that crypto companies are in a “Catch-22“ situation, where the SEC demands compliance while refusing to establish clear rules, thus creating an unsolvable dilemma for the industry.
This type of behavior is a deliberate attempt to destroy a sector by demanding the impossible and pursuing companies that fail to achieve it.
Accusations of Deliberate Destruction
Coinbase accuses the SEC of deliberately trying to destroy the crypto industry. The firm argues that the SEC initiates destructive litigations against non-compliant companies, a strategy that Coinbase labels as a concerted effort to demand the impossible and pursue those who fail.
According to Coinbase, this represents a major policy shift from the SEC, which insists that its stance on digital assets has never changed, although the facts prove otherwise.
Regulatory Context and Legal Actions
The debate over the need for specific regulations for cryptocurrencies is not new between Coinbase and the SEC. As early as July 2022, Coinbase requested the SEC to initiate a formal regulatory process to provide clear guidelines to the crypto industry.
Although the SEC has not introduced regulations specifically targeting cryptos, it has proposed rules over the past year that apply to this sector, such as the revision of custody rules, which require registered investment advisors to store crypto with a qualified custodian that meets specific requirements.
The SEC has also filed lawsuits against crypto platforms and projects, notably pursuing Coinbase in June for operating its platform without registration. The crypto community’s response to such actions has often been criticized as “regulation by enforcement,“ while SEC Chairman Gary Gensler argues that most cryptocurrencies are securities and should be regulated as such.
In April 2023, Coinbase attempted to force the agency to make a decision on its regulatory petition by suing the SEC. The agency subsequently denied the request for new rules, with Gensler stating that the existing rules already apply to cryptocurrencies and highlighting that the crypto market is small compared to the rest of the capital markets regulated by the SEC.
