• Coinbase has been waiting for the Securities and Exchange Commission to respond to its formal petition requesting tailored regulations for cryptocurrency since 2022. They even tried to force a response through the courts. Now, they have received a rejection.
  • Two of the five SEC commissioners disagreed, but said that there was no need to create a new crypto regime. The SEC already has some crypto rules in place and is enforcing them under its existing authority.
  • Coinbase has said that it will take the case back to court.

The Securities and Exchange Commission (SEC), the U.S. regulator, has rejected the petition of U.S. cryptocurrency exchange Coinbase to encourage it to adopt a tailored system for digital assets.

In , Chair Gary Gensler issued a statement with the denial. He also argued that the SEC’s authority is sufficient under current laws. The industry watchdog, he added, has been actively pursuing rule proposals for directly regulating crypto businesses.

Gensler also made a third point, stating that it is “important to retain the commission’s discretion when setting its own priorities.”

Coinbase applied this formal pressurization in 2022 before being sued by the SEC for not being a registered securities exchange. The company asked the federal court earlier this year to force the SEC to respond.

The five-member commission responded in a two-page document that said it had carefully considered the request. The commission denies the request for rulemaking because it believes that the current situation is unwarranted.

Paul Grewal, the Chief Legal Officer of Coinbase, said that the company would challenge the SEC’s rejection in court. He called the SEC decision “abdication”

Grewal stated in a press release that “no one who is looking at our industry fairly thinks the laws are clear or there isn’t work to be done.”

Hester Peirce, Mark Uyeda and other commissioners opposed the SEC denial.

In a statement , the Republican commissioners stated that they hoped that people would continue to propose specific rule changes, guidelines, and exemptions which could help the crypto industry continue its development in the United States. While we are disappointed that this important conversation is not being hosted by the commission, we will be open to listening to the ideas and conversations that other people host.

Grewal stated that Coinbase “is grateful that two commissioners disagreed and called for a real dialogue.”

He said: “We should work together to create laws that benefit US innovation and consumers, and not defend lawsuits based upon legal positions that are constantly changing.”

In a footnote to Gensler’s statement, Gensler argues that Coinbase’s own petition refers repeatedly to “digital assets securities” and SEC authority over them. “Therefore acknowledging that cryptoassets can be offered and traded as securities and are subject to SEC oversight.”

Gensler also mentioned – without naming Prometheum Inc. that a cryptobroker had used a special registration for digital assets, suggesting this method is “workable.”

Crypto lobbyists have made it their top priority to seek a more comprehensive, industry-specific regulatory system in the U.S. The legislative efforts in Congress this year have been making progress, but they are not yet complete. The SEC argues against the need for tailored securities rules, but the Financial Stability Oversight Council which includes the chairman of the SEC as a member has concluded yesterday in its annual report that Congress needs to act with regulations .

Read more: SEC says it may make a recommendation on Coinbase petition within 4 months

UPDATE (15 December 2023 at 16:23 UTC: Added opposition from two SEC Commissioners.

UPDATE (15 December 2023 at 18:30 UTC: Added response from Coinbase and further comment from Gensler.

Nikhilesh De.