Following the formal complaint filed by Coinbase, one of the leading cryptocurrency exchanges in the US against the Securities and Exchange Commission (SEC), the commission has been instructed to provide an official reply within the next 10 days. The complaint was filed on September 17, 2021, and failure to provide a response has forced the exchange to seek legal redress.
The Third Circuit just issued a text-only order directing the SEC to file a response to our mandamus petition within 10 days (and gave us 7 days for a reply). Here’s the text of the order:
TEXT ONLY ORDER (Clerk) At the direction of the Court, Respondent is ordered to file an…
— paulgrewal.eth (@iampaulgrewal) May 3, 2023
The case stems from Coinbase’s attempt to launch a lending product allowing its users to earn interest on their cryptocurrency holdings. However, the SEC has pushed back against the plan, claiming it may constitute security and fall under its purview.
The Implication of SEC’s Response to Coinbase’s Complaint
As experts claimed, If the SEC were to provide greater clarity and guidance on the regulatory status of cryptocurrencies, it could help elevate the industry and build investor confidence. However, if the SEC takes a hardline stance and seeks to regulate cryptocurrencies as securities, it could stifle innovation and hamper the growth of the industry.
Furthermore, there are questions about whether the SEC has the legal authority to regulate cryptocurrencies as securities. Some legal experts argue that digital currencies do not meet the traditional definition of security, as such, should be regulated differently.
Overall the outcome of Coinbase’s complaint against the US SEC will have far-reaching implications for the crypto industry and its regulatory landscape. As such, industry stakeholders will be closely monitoring the SEC’s response in the next couple of days.
Over the years, the crypto exchange platform has been subject to regulatory scrutiny and legal battles with U.S. regulators. In 2021, the SEC threatened to sue Coinbase over its proposed crypto lending service, citing concerns over investor protection.
Recall that in March, the United States regulator started investigating the publicly traded company, and issued a Wells Notice to keep the exchange informed. According to Coinbase, the Wells Notice pointed at services like the company’s exchange, its staking service, Coinbase Earn as well as Coinbase Wallet.
As recently reported by InsideCrypto, Adam Grabski filed a lawsuit against Coinbase claiming that its executives engaged in insider trading by selling millions of dollars worth of stock just months after the company went public.
