Coinbase has officially opposed the recent proposal of the U.S. Securities and Exchange Commission (SEC) to broaden the definition of exchanges.
In a statement on X, Coinbase’s Chief Legal Officer, Paul Grewal, criticized the SEC for including Decentralized Exchanges (DEXs) in the new definition without adequate analysis.
SEC’s Proposal Under Fire: Coinbase’s Argument Against Overreaching Regulations for DEXs
Coinbase Exchange has once again contended with a recent move from the US SEC over a blanket labeling of trading platforms to include DEXs.
According to Paul, Coinbase submitted a new set of concerns to the SEC regarding the agency’s proposal to broaden the definition of “exchange.” Coinbase argues that the proposal is flawed, lacks essential analysis, and is based on irrational assumptions.
Coinbase’s Chief Legal Officer further stated that the exchange believes that the SEC needs to demonstrate a genuine need for the proposed regulation and has exaggerated the purported benefits.
Coinbase contends that the SEC did not collect basic information or conduct an economic analysis on how the proposal would impact decentralized exchanges (DEXs), yet proceeded with the proposal based on unsubstantiated assumptions.
The exchange warns that extending the rule to DEXs could have severe consequences for millions of Americans engaged with digital assets and stifle innovation within the growing DEX market.
The SEC’s approach is criticized for starting with the assumption that a problem needs correction without providing evidence of such a problem. Coinbase asserts that this approach is inconsistent with sound rulemaking practices and calls for the proposal to be withdrawn and revised.
Coinbase stated,
“At a minimum, the proposal should be withdrawn and corrected.”
The company emphasized the need for careful consideration of their comments and expressed a willingness to continue discussions on this significant issue.
How SEC’s Proposed Rules Have Been Criticized for Stifling the Crypto Industry
The U.S. Securities and Exchange Commission (SEC) has a history of proposing regulations that have stirred controversy within the crypto industry, often being accused of stifling innovation and growth. The most recent example came on February 6, 2024, when the SEC expanded its definition of a “dealer” to encompass a wider range of financial operations, including those dealing with crypto securities.
The SEC’s expanded dealer definition applies to all types of securities, including crypto assets, based on the nature of trading activities rather than the type of security itself. According to the SEC, this shift is part of a broader regulatory push aimed at bringing the burgeoning crypto market under stricter oversight.
The new rule has sparked significant backlash from the crypto industry, with many arguing that it imposes undue burdens on innovation. In response, the Blockchain Association and the Crypto Freedom Alliance of Texas (CFAT) filed a lawsuit against the SEC in the Northern District of Texas.
These industry groups argue that the SEC’s expansion of the “Dealer Rule” stifles innovation in the U.S. digital asset market by imposing traditional financial regulations on a sector that operates fundamentally differently.
Critics of the SEC’s approach argue that the new rule could push some companies to relocate to more crypto-friendly jurisdictions, further weakening the U.S.’s position in the global digital assets market.
The legal challenge by the Blockchain Association and CFAT underscores the ongoing tension between the regulator and the crypto industry, as both sides seek to shape the future of digital finance in the U.S. The outcome of this lawsuit could have significant implications for how the crypto industry is regulated moving forward.
In related news, the SEC has requested a New York court deny Coinbase’s subpoena demanding extensive documents related to crypto assets. The SEC argued that Coinbase’s request is overly broad and seeks irrelevant documents, including internal agency communications and investigative files unrelated to Coinbase.
The post Coinbase Criticizes SEC’s New ‘Exchange’ Definition in a Comment Brief appeared first on Cryptonews.
