Coinbase Strongly Opposes SEC’s Controversial Regulatory Proposal

Key Points:

• Coinbase has written to the SEC again, claiming that regulating DEXs like a central exchange is unfeasible.
• The SEC’s most recent regulatory proposal defines exchanges as any technology that simply connects prospective buyers and sellers.
• Not only Coinbase, individuals in the industry also strongly oppose this adjustment of the SEC.

Coinbase has issued a new letter to the Securities and Exchange Commission, arguing against a plan to regulate decentralized exchanges in the same way that centralized exchanges are regulated.

The SEC wants to broaden the definition of exchanges to include some DeFi and crypto companies, such as decentralized exchanges or DEXs. Chief Legal Officer of Coinbase Paul Grewel strongly opposes the SEC’s mixed opinions.

“This proposal should NOT be adopted, and certainly not before completing the threshold steps for any rulemaking,” Grewel wrote in a thread on Twitter.

He said that a DEX, such as Uniswap, would be unable to register in the same manner as a national securities exchange.

“Requiring a DEX to register in the same way as a national securities exchange is impossible. Requiring the impossible violates the APA. And simply saying there is no economic data doesn’t absolve the SEC from conducting economic analysis, especially when that data exists. “

In the letter, Grewel authority an agency’s authority to regulate a particular industry does not include the to ban that industry absent clear Congressional authorization.

“In particular, the SEC is attempting to front run Congressional action by baking unsupported assumptions about its crypto jurisdiction into the proposed rules.”

Not just Coinbase but a lot of companies and organizations in the industry have spoken out about the SEC’s definition of DeFi. The Blockchain Association also responded to the SEC’s proposed exchange definition modification with a second 14-page letter. According to the Blockchain Association:

“The SEC claims that its Proposal is ‘technology neutral,’ but in consistently ignoring the unique challenges that persons using or providing access to Decentralized Protocols face in complying with the Proposal, the SEC is effectively discriminating against this specific type of technology.”

After a press statement saying that it wishes to broaden the term to include DeFi, the SEC reopened the feedback period in April. The deadline for comments ended 2 days ago.

Crypto industry activists and lobbyists claim that if the proposed regulation is implemented, it would violate developers’ First Amendment rights and will compound the SEC’s continuous mistake of neglecting to regard this sector as something new.

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Harold

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