Clear Crypto Regulations May Take Years

Key Points:

• The SEC has responded to Coinbase’s petition for clear crypto regulations, stating that rulemaking may take years and that enforcement actions will suffice.

The SEC recently responded to Coinbase’s petition for clear crypto regulations, stating that rulemaking may take years.

The U.S. Securities and Exchange Commission (SEC) recently formally responded to Coinbase’s petition for clear crypto regulations. The SEC stated that rulemaking may take years, and the SEC is in no rush.

The SEC argued that it is under no obligation to meet the requirements of Coinbase outlined in its petition and that the firm has called for a complex set of reforms and rule-making in a short time. The securities regulator has asked the court to deny the petition for mandamus, arguing that mandamus is an “extraordinary remedy” and that Coinbase “does not and cannot demonstrate a right” to relief.

Coinbase’s chief legal officer, Paul Grewal, said this might be the first time the securities regulator has explained its views on whether the SEC should create rules for the crypto industry. However, he also stated that a lot was still left on the table needing further clarification.

The SEC’s response reinforces Coinbase’s longstanding concern that the crypto industry does not have clarity on what the SEC may consider to be within or outside its jurisdiction at any time, and it is likely to continue changing its mind along the way.

According to the filing from the SEC, the regulator is not required to rush into rule-making for the crypto industry. The SEC acknowledged that it would continue to use enforcement actions as a substitute for rule-making for the foreseeable future, but not to worry. Those enforcement actions may eventually “inform” not-yet-planned rule-making.

“The rulemaking petition as to which Coinbase seeks an immediate determination asks the Commission to take a series of discretionary actions to replace existing applicable securities laws and regulations with a comprehensive new regulatory regime for the trading of crypto assets that are securities. As Coinbase’s own submissions make clear, considering the various paths it suggests is a necessarily complicated endeavor. Yet Coinbase filed its rulemaking petition fewer than ten months ago, supplemented aspects of the petition fewer than three months ago, and sought to supplement the record again only weeks ago.”

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