Coinbase, the leading cryptocurrency exchange, has once again taken aim at the U.S. Securities and Exchange Commission (SEC) over its proposed changes to the definition of a national securities exchange. In its third comment letter on the matter, the company vehemently criticizes the SEC’s cost-benefit analysis, arguing that the agency lacks crucial information to justify the proposed overhaul.
At the heart of Coinbase’s argument is the SEC’s apparent inability to define a “crypto asset security.” Without a clear understanding of this fundamental term, the exchange contends that the agency cannot possibly conduct a thorough cost-benefit analysis. Additionally, Coinbase points out that the SEC has no accurate data on the number of exchanges operating in the market, further undermining the legitimacy of its analysis.
Coinbase’s Chief Legal Officer, Paul Grewal, is particularly scathing in his assessment of the SEC’s proposal. He asserts that the agency’s reliance on irrational arguments is unacceptable and that the proposal should be withdrawn entirely until proper research is conducted. Grewal also highlights the challenges faced by decentralized exchanges (DEXs) under the proposed regulations, arguing that they would be unable to comply with the stringent disclosure requirements.
The SEC’s proposal, which has been met with widespread criticism from industry stakeholders, aims to expand the definition of an exchange to include communication protocol systems, effectively bringing decentralized finance (DeFi) under the SEC’s regulatory purview. While the initial proposal did not explicitly mention DEXs, subsequent actions by the SEC have made its intentions clear.
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Coinbase‘s latest salvo joins a chorus of opposition to the SEC’s proposal. The Blockchain Association, Republican lawmakers, and other industry players have all raised concerns about the potential negative impacts of the new regulations. DEX Uniswap has also challenged the SEC’s legal basis for the proposal, citing a recent Supreme Court decision.
As the battle between the cryptocurrency industry and regulators intensifies, Coinbase’s aggressive stance underscores the high stakes involved. The outcome of this dispute could
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