Coinbase, one of the leading cryptocurrency exchanges, has filed a motion in court asking the Securities and Exchange Commission (SEC) to clarify the regulations surrounding cryptocurrencies. Coinbase argues that current regulations are vague and hinder innovation in the industry. The court motion is part of a larger legal battle between Coinbase and the SEC regarding the launch of a new lending product. If successful, Coinbase’s motion could provide greater clarity and certainty for other crypto companies navigating the regulatory landscape.
Coinbase, the popular cryptocurrency exchange, is demanding that the Securities and Exchange Commission (SEC) provide clear regulations on digital assets securities. Last July, Coinbase sent the SEC a “petition for rulemaking” and asked for rules to be proposed and adopted in the industry. The company also wanted answers to 50 specific questions related to the regulatory treatment of digital asset securities. The SEC is required by law to respond within a “reasonable” amount of time, but Coinbase has gone nine months without a response. The company filed a lawsuit against the SEC Monday to compel the agency to respond to its demand for clearer rules and regulations.
The lack of clear rules and guidelines for digital asset securities is harming the health of U.S. capital markets, according to Coinbase’s petition. The company says new rules would allow for a more efficient and effective allocation of capital in financial markets. However, if the SEC does not believe new rules are necessary, Coinbase has the opportunity to challenge them in court. Currently, the exchange’s push for regulatory clarity is effectively on ice until it receives a response from the SEC.
Coinbase’s challenge comes amid a regulatory crackdown in the U.S. The SEC and the Commodity Futures Trading Commission (CFTC) have stepped up their scrutiny on digital assets firms this year. Kraken, another cryptocurrency exchange, settled with the SEC in February over its staking-as-a-service program, paying a $30 million fine and agreeing to cease the service for clients in the U.S.
Coinbase is set to report earnings for its first fiscal quarter of this year on May 4, which will likely serve as an opportunity for analysts to gauge the digital assets industry’s temperature.