Coinbase has long argued that its business model should not be regulated by the SEC, but after months of back-and-forth a decision on whether or not to allow the industry to be regulated is looming. As regulators warm up to crypto, Coinbase believes it needs clarity on how existing frameworks would apply to it before making any decisions.
Given that digital securities offerings are growing in popularity, the SEC may decide to create rules governing this new form of investment. If this happens, Coinbase would be well-positioned to comply with these new regulations.
The rulemaking process is a way for agencies to develop regulation with the benefit of public input, and ensure that their position is tested through judicial review. So far, Coinbase has received 1,700 comments expressing support for its petition for clarity surrounding its ambiguous cryptocurrency regulatory status. The company will now consider all of these perspectives in order to come up with a final conclusion that satisfies regulators and the public alike.
It appears that the SEC is denying Coinbase’s petition, but they have not yet announced their decision to the public. This suggests that the regulator is still considering Coinbase’s request, and may be waiting for further guidance from Congress or the courts.
The SEC has been criticized for its actions against crypto firms, as well as entrepreneurs including Justin Sun and Do Kwon. The petition filed on Monday seeks to overturn the regulator’s decisions.
The exchange has come under fire in recent months from the SEC for their products, notably their stated aim to be a ‘safe and secure place for investors’. The American regulator warned Coinbase that they may sue the company if it does not improve its practices. This is due to the fact that Coinbase has been unable to roll out new products because of legal uncertainties even as its rivals have scaled in international markets.
Coinbase may consider moving its headquarters outside of the United States if the country’s regulatory approach does not change. Brian Armstrong, co-founder and chief executive of Coinbase, has expressed this sentiment in recent comments and indicated that any option is on the table, including relocation. Foreign governments have been difficult to work with in regards to digital currency regulation, specifically when it comes to Bitcoin. However, Coinbase still plans on operating within the United States as long as federal laws are adhered to. If regulators do not approve of digital currencies or they prove too unstable for widespread use, Coinbase may decide that relocating is necessary in order to operate legally and continue serving its user base.
Coinbase is concerned that the SEC is looking to use outdated laws to regulate their business, which could lead to costly fines. The company feels that regulatory clarity is overdue for the cryptocurrency industry, and they are urging the SEC to work with them on a clearer definition of how their business works.