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Coinbase, the top US crypto exchange, has filed a lawsuit against the Securities and Exchange Commission (SEC), hoping to prompt the regulatory body to provide regulatory clarity for the cryptocurrency industry.
Coinbase Files Lawsuit Against SEC for Regulatory Clarity in the Crypto Industry
In a narrow action, Coinbase has requested a US federal court to press the SEC to respond to its previous rulemaking petition within seven days.
In July of last year, Coinbase urged the SEC to formulate and implement regulations that could determine the classification of digital assets as securities and provide guidance on the application of securities laws to such assets. Coinbase maintained that the absence of a well-defined and practical regulatory framework in the US was hindering the efficient operation of the market.
Coinbase is asking the SEC to provide clarity on the treatment of staking services. However, the SEC has not provided any response or commented on the request, according to Coinbase.
Coinbase said it does not ask the Court to instruct the agency how to respond, but it simply requests that the Court orders the SEC to respond at all. The lack of formalized decision-making from the SEC has created uncertainty for crypto companies and blocked them from adequately preparing for the future.
In September 2021, Coinbase received a Wells notice regarding its plans to introduce interest-generating crypto accounts, which were subsequently abandoned. CEO Brian Armstrong has expressed the company’s willingness to contemplate relocating, stating that “anything is possible, including moving away from the United States.”
The US crypto market has been marked by ambiguous regulations, leading some to exit the country. Coinbase, however, appears determined to alter this trend, as evidenced by its decision to take legal action against the SEC.
Paul Grewal, Coinbase’s Chief Legal Officer, expressed his view that the SEC is initiating enforcement actions based on an interpretation of the law that hasn’t been made known to the public.
“The action Coinbase filed today is a small but important part of our multi-year, continual plea to leaders in Washington for clear rules of the road,” he wrote in a blog post.
Lack of Formalized Decision-Making from the SEC Creates Uncertainty for Crypto Companies
Coinbase demands the SEC respond to its previous rulemaking petition. The petition had garnered support from over 1,700 entities and individuals who have echoed the call for regulatory clarity in the crypto industry.
By suing the SEC, Coinbase aims to prompt the securities watchdog to provide regulatory clarity for the crypto industry. The move is seen as a step towards addressing the uncertain regulatory environment that has been a cause for concern in the US crypto market, prompting some to relocate out of the country.
In March of this year, Coinbase received a Wells Notice from the SEC, indicating the possibility of civil action against the company for its spot market, wallet products, Coinbase Prime, and Coinbase Earn.
Back in January, Coinbase got a $50 million fine because they supposedly didn’t have an effective system in place to detect dodgy activity during transactions. Plus, the New York Department of Financial Services also told them to cough up another $50 million so they could sharpen up their compliance program.
The Chief Legal Officer of Coinbase, Paul Grewal, said in a blog post, “From the SEC’s public statements and enforcement activity in the crypto industry, it seems like the SEC has already made up its mind to deny our petition. But they haven’t told the public yet. So the action Coinbase filed today simply asks the court to ask the SEC to share its decision.”
Coinbase is not asking the Court to instruct the agency how to respond but “requesting that the Court order the SEC to respond at all, which they are legally obligated to do,” he added.
“The rulemaking process is a critical step to giving the public notice about what activities they can and cannot engage in. So until the crypto industry gets that clarity, we will continue to take every step available to us to seek it, which includes today’s filing,” Grewal concluded.
Coinbase’s “Stand with Crypto” NFT Collection To Support Growing Advocacy Efforts
As the regulatory climate for cryptocurrencies in the United States becomes increasingly hostile, crypto firms have been stepping up their lobbying and advocacy efforts. Leading the charge is Coinbase, one of the largest crypto exchanges in the US.
After taking legal action against the SEC, the company launched a non-fungible token (NFT) collection to amplify its crypto advocacy agenda.
The commemorative NFT collection, called “Stand with Crypto,” was introduced on the Zora NFT marketplace. According to Coinbase, the NFTs represent a symbol of unity for the crypto community that seeks sensible crypto policy.
The NFTs are free to mint and feature a blue shield that represents a decision to promote and protect the potential of crypto. Collectors are encouraged to add a shield emoji to their Twitter display names and sign up for Coinbase’s Crypto435 advocacy program.
Though the NFTs have no value or utility, Coinbase will use the fees from the mint to support prominent crypto advocacy groups like Blockchain Association, DeFi Education Fund, and Coin Center. As of this writing, over 10,000 collectors have minted 27,278 Stand with Crypto NFTs, according to data from the website.
The unveiling of the NFT collection came shortly after Coinbase filed a lawsuit against the SEC for failing to respond to a July 2022 petition requesting clear rules for the crypto markets.
In 2022, the company spent $3.39 million on crypto lobbying efforts, making it the top spender in the US. The Stand with Crypto NFT collection is just one example of Coinbase’s growing list of advocacy and lobbying efforts.
Coinbase, being the highest spender on crypto lobbying efforts in the US, spent $3.39 million in 2022. The Stand with Crypto NFT collection is an instance of Coinbase’s expanding range of advocacy and lobbying efforts.
In February 2023, Coinbase launched Crypto435, an initiative that aims to turn everyday US crypto users into advocates by connecting them with lawmakers. In March, Coinbase CEO Brian Armstrong called on the community to elect pro-crypto politicians.
Additionally, the company has been expanding its international presence and has announced plans to launch a derivatives crypto exchange incorporated in Bermuda. Armstrong has also expressed openness to moving the company’s headquarters to the United Kingdom.
By introducing commemorative NFTs, Coinbase has found a unique way to involve the crypto community in the fight for clear crypto regulations in the US.
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