(Reuters) - (The views expressed here are those of Reuters reviewers.)
On Monday, the U.S. Securities and Exchange Commission released a detailed public response to criticism of the cryptocurrency industry, stating in its appeal statement that the agency should not rush to formally regulate digital assets, but should instead be free to continue monitoring cryptocurrencies through private enforcement. . method
You won't be surprised to learn that the Securities and Exchange Commission (SEC) didn't help the critics of cryptocurrencies in their new report.
On Tuesday, many told me that filing with the SEC would actually bolster their argument that the agency cannot provide meaningful guidance to legitimate crypto firms seeking to stay away from US regulators.
“Whether the SEC likes it or not, the industry is moving forward globally,” said Kaifan Sadeghi of the General & Block Cryptocurrency Innovation Council. “You have no choice but to decide what to do,” US regulators said.
The SEC, which declined to comment through a spokesperson, issued a new memorandum in response to an emergency lawsuit filed last month by cryptocurrency exchange Coinbase Global Inc. (COIN.O), which announced that a subpoena was pending. After that, in court with the SEC.
Pending this enforcement action, Coinbase has asked the U.S. Court of Appeals for the Third Circuit to force the agency to respond to the petition by July 2022, he said.
Coinbase said the appeals court is considering whether the SEC has any plans to pursue the regulatory process the complaint alleges. Coinbase argued that under these unusual circumstances, the lack of a response from the SEC was an "unreasonable" delay. The goal of the SEC, according to Coinbase, appears to be to avoid litigation in favor of enforcement action to remove traditional regulation and implement cryptocurrency policy.
Coinbase's arguments were echoed in statements last week by the Cryptocurrency Innovation Council, investment firm Paradigm Operations LP, and the Investor's Choice Advocates Network, who are frequent allies on major crypto issues. The US Chamber of Commerce has also spoken out, arguing that the SEC's inaction, including its "pocket veto" on the Coinbase petition, is stifling innovation in the trillion-dollar industry.
The SEC's new response to the Coinbase lawsuit is misguided as the agency did not personally veto the Coinbase petition, but instead engaged in a thorough analysis of potential cryptocurrency rules, including several proposed new rules. The company says there is no legal deadline for responding to regulators' petitions, but the months-long delay certainly doesn't justify the emergency relief sought by Coinbase and its affiliates, especially given dozens of meetings with SEC officials. He liked Coinbase's advice.
The SEC dismissed the petition, saying it should not take enforcement action until it determines which cryptocurrencies are securities. The agency said it is considering additional rules and regulations while still enforcing existing securities laws. He also said that his crypto cases gave industry participants, including Coinbase, the opportunity to present their case in amicus summaries before the judges. Enforcement action requires a judicial investigation, the SEC says, so Coinbase's claims of a runaway are unfounded.
The company said that Coinbase might not like the deliberate SEC process. But this does not mean that Coinbase and its cryptocurrency friends can advance SEC priorities.
Coinbase Chief Legal Officer Paul Grewal responded to the SEC in a series of tweets on Monday, saying the agency only added to Coinbase's concerns about a one-year deadline for regulatory transparency.
In phone and email conversations with me on Tuesday, lawyers for Coinbase supporters briefed Grewal on the matter. Coinbase is the latest in a long line of crypto firms that, starting in 2017, petitioned the SEC to begin formal regulation of what assets are owned by Paul Hastings' Nicholas Morgan, aka Icahn. founded Digital, notes former SEC attorney his agent
“Very cool,” Morgan wrote in an email. "This did not fulfill the SEC's obligation to respond to regulatory complaints that involved several alleged related actions."
Taylor Bagley of the House Law Reform Institute echoed the House's call for "leadership and confidence" from regulators. “The failure of the SEC to take action relying on enforcement regulation would cause significant economic damage,” he said in an emailed statement.
Crypto Council lawyers Sadeghi and Michelle Jenner tell me there is a serious flaw in the SEC's argument that ongoing enforcement will help shape digital asset regulation. Sadeghi and Cullen said that the SEC cases so far have focused mainly on entities issuing crypto tokens, and not on entities involved in the secondary trading of digital assets. (An exception is the SEC case against a Coinbase employee accused of insider trading.)
As a result, Jenner's attorneys said the SEC filing does not provide meaningful guidance to the industry as to whether the underlying tokens themselves can be securities or registered for trading under applicable securities laws. . Cullen simply told the "good plaintiffs" that the SEC had "no way" to guarantee that they would become defendants in the enforcement process.
Or, as another crypto lawyer, who wished to remain anonymous to protect client privacy, put it: “This is a long-running crazy game of chicken.
The SEC has heard all this before, of course, in other crypto cases in a friend's feed. And chances are Coinbase's third loop won't force government regulators to change course. Appellate courts rarely agree to force agencies to respond to regulatory requests, and when they do, unreasonable delays take months, not years. So it's not surprising that the SEC's strategy makes well-known arguments about the legitimacy of its enforcement actions.
His critics say the Securities and Exchange Commission is shirking its vital role in protecting investors in a trillion-dollar industry forced to grow outside the United States. For now, the SEC doesn't seem to be bothered by this possibility.
To learn more:
Coinbase and Crypto Industry Hope New Supreme Court Decision Will Be a Magic Tool
Frustrated Coinbase Tries to Use Rare Trick to Force SEC
Sorry crypto world, but the SEC is not far behind on “enforced regulation.”
(Reporting by Alison Frankel) Editing by Lee Jones
Our Standards: Thomson Reuters Trust Policy.
The opinions expressed are those of the author. They do not reflect the views of Reuters News, which strives for fairness, independence and impartiality based on the principles of good faith.