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SEC’s Arbitrary Assault on Coinbase Will Have Chilling Effect

28 July 2022

The SEC’s enforcement probe of Coinbase alleging the platform allowed users to trade tokens that the regulator says should be registered as securities could have more far reaching, chilling effects.

“Given many of the tokens the SEC has called securities in their insider trading prosecution are listed and trading on Coinbase and other exchanges, this investigation could have serious and chilling effect for both those exchanges and the token projects, whether or not an ultimate finding is the tokens are or are not securities,” Michael Bacina, an Australian digital assets lawyer with Piper Alderman told Cointelegraph.

“Bacina noted that Coinbase ‘could face very substantial fines’ or potentially be required to register as an exchange in the U.S. as a result of the investigation.

“However, he also noted that ‘given they have rightly identified key compliance incompatibilities between blockchain systems and existing U.S. market regulations, it may be difficult, if not impossible, for their current business model to exist as a licensed and registered exchange.’”

As we have asserted previously, the SEC’s arbitrary regulation-by-enforcement attitude towards cryptocurrency is only adding chaos to the market without providing any security or clarity.

“’The best way to foster the innovation blockchain and crypto can bring is with a transparent engagement between regulators and the industry, and clear guidance being issued,’ he added.

“’A CFTC Commissioner has rightly called this ‘regulation by enforcement’ and it’s not an ideal way to provide guidance or clarity to a rapidly growing and developing industry,’ he said.”

Regulators and legislators should heed the call for a more consistent and light-handed approach to the crypto space, or risk having it simply exit their jurisdiction for more friendly regulatory territory.