The U.S. Securities and Exchange Commission (SEC) has denied a petition from cryptocurrency exchange Coinbase, which requested the development of new rules for digital asset securities. In a response letter to Coinbase, the SEC stated that it believes the requested rulemaking is currently unwarranted and therefore denies the petition. This decision concludes a lengthy back-and-forth between Coinbase and the securities regulator, which lasted for almost 18 months.
Coinbase initially petitioned the SEC in July 2022, urging the agency to create a new regulatory framework for crypto asset securities through its formal rulemaking process. The exchange argued that the existing SEC rules are inadequate for digital asset securities operating on blockchain technology. However, the SEC’s denial letter contradicts Coinbase’s assertion that applying existing securities statutes and regulations to crypto asset securities is unworkable.
The SEC’s rejection of a specialized crypto framework aligns with SEC Chair Gary Gensler’s persistent view that most crypto assets should be subject to long-established investor protection rules. Gensler has consistently emphasized this position. The agency explicitly stated that it currently has no plans to undertake the discretionary rulemaking requested by Coinbase to establish a new regulatory framework for crypto asset securities.
The SEC cited other ongoing initiatives that may influence whether future rule changes are necessary. The agency has the discretion to determine the timing and priorities of its regulatory agenda, including discretionary rulemaking. Therefore, it appears that the SEC is not inclined to create a new regulatory framework for crypto asset securities at this time.
Before the SEC’s outright rejection of its rulemaking petition, Coinbase took legal action against the securities regulator in an attempt to compel a response. In April 2023, the exchange filed a lawsuit to force the SEC to officially accept or reject the petition originally submitted in July 2022. With the SEC’s denial of the petition, Coinbase has received a definitive answer to its legal challenge.
The SEC’s decision to deny Coinbase’s petition for new rules on digital asset securities reflects the agency’s belief that the current regulatory framework is sufficient. It also aligns with SEC Chair Gary Gensler’s standpoint on investor protection for crypto assets. Although Coinbase’s argument for a specialized crypto framework was rejected, the SEC stated that it will continue to evaluate ongoing initiatives that may inform future rule changes. Nonetheless, at this time, the SEC has no plans to create a new regulatory framework specifically for crypto asset securities.
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