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Coinbase SEC Petition Denied: “Existing Laws Already Apply”
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Coinbase SEC Petition Denied: “Existing Laws Already Apply”

The Coinbase SEC petition was denied by the regulatory authority, citing sufficiency of "existing laws."
Alex Lari
By: Alex Lari
Jan 22, 2024
3 min read
Coinbase SEC Petition Denied: “Existing Laws Already Apply”

In a recent development, the U.S. Securities and Exchange Commission (SEC) has made a firm decision regarding Coinbase Global Inc.’s petition for new regulatory rules in the digital asset sector. The Coinbase SEC petition was denied by the regulatory authority, citing sufficiency of “existing laws.”

Coinbase SEC Petition: What Happened?

Coinbase, the largest digital asset exchange in the U.S., sought new regulations from the SEC, arguing that existing regulations were inadequate for the industry. However, the SEC, in a 3-2 vote, denied the petition, stating a fundamental disagreement with Coinbase’s claim that current regulations are “unworkable” for the digital asset market.

The SEC penned:

“The Commission has discretion to determine the timing and priorities of its regulatory agenda, including with respect to discretionary rulemaking such as that requested in the Petition.”

SEC’s Stance

SEC Chair Gary Gensler supported the denial, emphasizing that existing laws and regulations already apply to the digital asset securities markets. He highlighted that the SEC addresses these markets through rulemaking and maintains the discretion to set its regulatory priorities.

Gensler added:

“I disagree with the petition’s assertion that now is the right time for the regulatory action it suggests. The Commission and its staff are currently pursuing numerous undertakings applicable to crypto asset securities and intermediaries, and the Commission’s assessment of whether and, if so, how to alter the existing regulatory regime may be informed by the results of these initiatives.”

Key Points Raised by SEC

Gensler pointed out that Congress designed securities laws broadly, encompassing various investment forms. He referenced established legal principles defining an “investment contract,” stating that these principles have been applied to numerous digital assets by federal courts.

The SEC reiterated its commitment to overseeing digital asset securities, emphasizing the importance of registration and disclosures to protect investors. They highlighted enforcement actions against unregistered broker-dealers and trading platforms, underscoring the necessity of regulatory oversight to prevent fraud and manipulation.

Related reading: According To SEC, Bitcoin Commodity, Cryptos Securities?

Gensler disagreed with Coinbase’s timing for regulatory action, citing ongoing undertakings and initiatives within the SEC relevant to digital asset securities. He mentioned initiatives like the Special Purpose Broker-Dealers Release and various proposed rules are applicable to digital assets.

In conclusion, the head of the regulatory authority expressed his support for the Commission’s decision for three reasons. First, he highlighted that existing laws and regulations already apply to the digital securities markets. Second, the SEC addresses digital asset securities markets through rulemaking. Third, he emphasized the importance of maintaining Commission discretion in setting its own rulemaking priorities.

Coinbase’s Assertion

Coinbase, in response, disagreed with the SEC’s position. It argued that industry experts believe the laws lack clarity, indicating the need for more work to be done to benefit consumers and foster U.S. innovation.

This denial adds to the ongoing conflict between the digital asset sector and the SEC, which has categorized most tokens as securities, subjecting them to its jurisdiction. The SEC has filed lawsuits against several digital asset firms, including Coinbase, over listing and trading tokens considered unregistered securities.

SEC also has an ongoing legal action against Binance for violating the securities law.

Related reading: U.S. Chamber of Commerce Slams SEC for Regulatory Uncertainty

Commission’s Discretion

Maintaining the SEC’s discretion regarding rulemaking priorities was a crucial aspect for Gensler. He emphasized the need to deploy resources thoughtfully and prioritize regulatory agendas based on market needs.

In a distinct declaration, SEC Commissioners Hester Peirce and Mark Uyeda expressed their dissent with the Commission’s ruling. They highlighted that the petition brings forth crucial concerns linked to emerging technologies, emphasizing that tackling these concerns constitutes an integral aspect of responsible regulatory practice.

The Verdict and Its Possible Results

The SEC firmly stands by the belief that the existing securities regime appropriately governs digital asset securities. The agency denied Coinbase’s petition for new rules, emphasizing the importance of registration, compliance, and investor protection within the evolving digital asset landscape.

The denial of Coinbase’s petition signifies a critical stance by the SEC, reaffirming its commitment to enforcing existing laws in the digital asset sector. However, the ongoing conflict between regulatory oversight and industry demands clearer regulations, setting the stage for further developments and potential legal battles.

The SEC’s decision marks a pivotal moment in the ongoing dialogue between regulatory bodies and the rapidly evolving digital asset industry.

Related reading:

https://bitcoinnews.com/bitcoin-the-only-winner-in-sec-clash

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