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SEC Crackdown on Coinbase Draws Broad-Based Criticism26 July 2022
The crypto regulatory fool’s crusade continued in Washington this week with the SEC bringing Coinbase under fire with an enforcement probe alleging the platform is allowing users to trade tokens that the regulator says should be registered as securities.
Coinbase strongly denied the allegation.
“We are confident that our rigorous diligence process — a process the SEC has already reviewed — keeps securities off our platform, and we look forward to engaging with the SEC on the matter,” Coinbase’s Chief Legal Officer Paul Grewal said in a statement on the company’s blog.
The SEC’s clumsy, uneven regulation-by-enforcement attitude towards digital assets and cryptocurrency is only adding chaos to the crypto space, not providing any security.
Diverse voices in and out of the industry weighed in.
Barron’s argues that Coinbase — and by extension other crypto platforms — need legislative relief from the SEC’s capricious actions.
“Congress is the only entity that can save Coinbase Global Inc. (ticker: COIN) and other crypto companies from a crackdown by U.S. enforcement agencies, and it’s looking increasingly unlikely that such relief will come soon.
“The latest sign of the threat came Monday evening from a Bloomberg News report that the Securities and Exchange Commission is probing whether the platform is allowing Americans to trade tokens that should be registered as securities.
“Coinbase last week submitted a “petition for rule-making” to the agency asking it to propose rules identifying which tokens are securities, among other issues. The SEC isn’t required to act on the petition, and Coinbase faces a problem in that Gensler has said the rules crypto platforms need to follow are already clear.”
Owen Tedford, a senior research analyst with Beacon Policy Advisors, told Barron’s, “Platforms are going to continue to face crackdowns from regulatory agencies until Congress passes a law or they register with the agencies.”
here are Congressmembers who seem open.
In response to the SEC’s announcement of the Coinbase action, U.S. Pat Toomey, R-PA, tweeted that, “…the SEC’s regulation-by-enforcement approach to digital assets poses a serious challenge for any well-meaning innovator who’s striving to comply with existing laws and regulations. Providing regulatory clarity prior to enforcement would benefit regulators and investors alike.”
Similar criticisms of the SEC regarding crypto came from members of the House Oversight Reform Committee.
Even progressive Mark Cuban argued the obvious on Twitter — that the SEC regulating crypto will be a “nightmare.”
“Think this is bad? Wait till you see what they come up with for registration of tokens. That’s the nightmare that’s waiting for the crypto industry. How else do you keep thousands of lawyers employed and create reasons to ask for more taxpayer money?”
We strongly agree. This ad hoc, arbitrary prosecution is unjustifiable and serves no one but the legal industry and the bureaucratic elite.
The Internet routes around blockages, and crypto will do the same to arbitrary regulations and spotty enforcement. Whether regulatory bodies are capricious or simply oppressive, innovators in crypto and blockchain will simply seek less regulated markets outside the United States, and we will all lose.