The cryptocurrency industry is pushing the US Securities and Exchange Commission (SEC) to establish clear rules and regulations for the crypto market.
Major players, including Paradigm, the Crypto Council for Innovation, and the US Chamber of Commerce, have argued with the district court to support Coinbase’s appeal to the SEC to provide specific guidelines for the crypto industry.
Crypto Industry Challenges SEC’s Regulatory Approach
In a court filing submitted on Monday, Paradigm expressed interest in the case, highlighting the SEC’s continued refusal to issue final rules and guidance regarding cryptocurrencies, tokens, and related trading platforms.
Paradigms’ legal team explained that despite bringing enforcement actions in the crypto space, the SEC has not adequately explained the legal basis for its authority, creating uncertainty for entrepreneurs and hindering the availability of judicial review.
The Crypto Council for Innovation and other industry stakeholders argue that the SEC’s current approach contributes to the ambiguity surrounding cryptocurrencies and hinders the industry’s progress. In addition, the Crypto Council asserts that the SEC’s current regulatory framework, designed for traditional securities, does not address the unique characteristics of crypto assets.
Unlike securities, crypto-assets do not rely on a centralized issuer and operate within decentralized networks and communities. As a result, the SEC’s focus on requiring disclosures from centralized issuers does not provide digital asset holders with the material information they need.
The filing reads that the current framework also imposes unnecessary intermediaries that hinder the disintermediated nature of crypto trading platforms.
Paradigm also points out that several crypto projects have attempted to comply with SEC registration requirements but have faced significant challenges. The SEC initially recommended using Form 10 for registration but later abandoned this approach, leading to the failure or stagnation of projects that followed it.
Other projects explored using the “Reg A” registration exemption, but according to the Crypto Council, this also proved “unworkable” when applied to crypto assets. Furthermore, the firm claims the existing regulatory framework, designed for traditional securities, does not address the unique characteristics and requirements of the crypto industry.
Coinbase Urges SEC For Clear Guidelines
Coinbase petitioned the SEC to create clear guidelines regarding when crypto assets should be classified as securities. Coinbase argued that the industry, valued at over $2 trillion, needs regulatory oversight and that companies are eager to comply with a well-defined framework.
The court filing further states that regulatory compliance requires predictability, and Coinbase’s petition seeks to establish a stable balance between regulation and innovation.
Paradigm concluded its arguments by stating that the SEC’s current approach of regulation-by-enforcement, where attempts at compliance are met with punishment, does not provide the stability necessary for the industry to thrive. The filing concludes by asserting:
The Court should vacate the agency’s denial of Coinbase’s rulemaking petition and remand with instructions for the SEC to engage in rulemaking.
Ultimately, the crypto industry, represented by Paradigm, the Crypto Council for Innovation, and other stakeholders, is calling on the SEC to initiate rulemaking for the crypto sector.
The demand for clear guidelines stems from the SEC’s persistent refusal to provide comprehensive rules and guidance, hindering the growth and development of the industry.
Coinbase’s stock, traded under the COIN ticker, is currently valued at $228, reflecting a decline of more than 4% in the last 24 hours. This decline closely mirrors the price movement of Bitcoin (BTC), which has experienced a 5% drop, bringing its price to $64,200 at the time of writing.
Featured image from Shutterstock, chart from TradingView.com