Last Friday, the United States Securities and Exchange Commission denied a request from US cryptocurrency exchange, Coinbase, that sought new rules for the crypto industry. Coinbase has vowed to challenge the decision in court, but this is just one of many crypto-related stories making headlines this Holiday Season.
Also making waves is another story about the SEC, this time about the prospective approval of a Bitcoin-backed ETF (Exchange Traded Fund). That decision is not set for release until the second week of January but it is safe to say that the denial of Coinbase’s petition has dealt a blow to the belief that the SEC will approve the Bitcoin ETF.
Current Regulations Work Well, Panel Says
The SEC’s striking down of Coinbase’s request for rule changes came down to a 3-2 vote by the five member commission assigned to handle this issue. Coinbase alleges that new rules for cryptocurrencies must be made due to the antiquated nature of the US financial regulatory system. Being that US financial laws have not changed in many significant ways since the dawn of crypto, Coinbase and others argue that
The December 15th decision by the SEC underscores a larger series of battles between the crypto sector and US financial regulators. Repeatedly, the SEC maintains that crypto tokens are securities in the same way as stocks and bonds, and should be regulated as such. It is this maintained belief on the part of the SEC that has led to several lawsuits levied against crypto companies who are allowing for the trade and sale of “unregistered tokens.”
Coinbase’s chief legal officer refuted the SEC’s narrow-minded view by saying, “No one looking fairly at our industry thinks the law is clear or that there isn’t more work to do. We should be working together to create laws and rules that will benefit consumers and US innovation.”
A Battle Over A Year In The Making
The petition for new rules filed by Coinbase actually dates back to 2022, when it was first filed. After some time had passed and the SEC did not issue a reply, Coinbase pressed harder and moved towards compelling some sort of response through the courts. The SEC then said it would reply to the petition in time, and that reply is what we received last Friday.
Chair of the SEC, Gary Gensler, attempted to flip the script a bit in his statement after the decision was made public. Gensler pointed to the petition’s existence as the crypto sector admitting that the SEC does have authority over them. The idea of the SEC overseeing crypto transactions is something that, to many, could not be further from the decentralized world they envision. While this seems to be more of a gloat on the part of Gensler than anything else, it does beg the question of just how far are crypto companies willing to go to gain legitimacy in the eyes of governments?
The two dissenters on the five member panel were both Republicans, Hester Peirce and Mark Uyeda. Their view is that the SEC’s refusal to adapt to a world where cryptocurrency inches further into the mainstream is short-sighted, at minimum. Though there is no real way to tell when or how the war between US financial regulators and the cryptocurrency sector will end, you can rest-assured knowing that the battles are only going to rage on for now as the SEC remains obstinate in their position.