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Coinbase, the only publicly-traded cryptocurrency exchange in the United States, has filed an action in a federal court seeking a response from the Securities and Exchange Commission (SEC) to a petition it submitted in July 2022.
The petition requested the SEC to propose and adopt clearer regulatory guidelines for the cryptocurrency industry in the US, and included 50 specific questions related to the regulatory treatment of digital assets.
Coinbase's Chief Legal Officer, Paul Grewal, said the Administrative Procedure Act required the SEC to respond to the exchange's rulemaking petition "within a reasonable time."
As more than nine months have passed without a response, Coinbase is pushing hard to get an answer. The exchange received a Wells Notice from the SEC on March 22, which hints at potential enforcement actions against the crypto exchange, and Grewal stressed the importance of clarity, especially considering the potential regulatory enforcement actions against Coinbase and other crypto companies.
On February 9, Coinbase's peer exchange Kraken reached a $30 million settlement with the SEC for failing to register its staking-as-a-service program, which the SEC claimed were securities.
SEC Commissioner Hester Peirce was critical of the agency's decision to impose a $30 million settlement on Kraken, calling it "not an efficient or fair way of regulating" and condemning the closure of a beneficial program for users.
Earlier in the year, on February 12, the SEC and the New York Department of Financial Services ordered Paxos, the issuer of the US dollar-pegged stablecoin Binance USD, to stop minting and issuing the token.
With the US becoming increasingly hostile towards the crypto industry, clarity from regulators is essential for the sector to move forward.
Coinbase is reportedly seeking to move part of its operations to Bermuda, having received a license to operate there. The company is set to launch a derivatives exchange in the region shortly.
Analysts will be closely watching Coinbase's earnings report, due on May 4, to gauge the health of the wider crypto sector in the US.
Coinbase's legal action and growing interest in moving operations outside of the US come amid a growing debate on how to regulate cryptocurrencies, with lawmakers grappling with how to balance innovation and growth in the industry with consumer protection and financial stability concerns.