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Court Gives SEC 10 Days to Reply to Coinbase’s Allegations

In a statement made on May 4, 2023, by Paul Grewal, lead legal officer at Coinbase, the Third Circuit Court of Appeals has responded to a complaint the company filed against the U.S. Securities and Exchange Commission (SEC). The complaint addressed the need for transparent regulations governing the digital asset trade.

Grewal stated that the SEC had 10 days to respond to the exchange’s writ of mandamus, which is an order from a court instructing an inferior government office to properly discharge their official duties. He also stated that Coinbase has been given seven days to respond to the SEC’s response to the complaint. In his statement, he thanked the court for a thorough investigation of the case.

Coinbase requested the court in an April complaint to mandate that the SEC make public its position on a complaint that had been submitted earlier. The cryptocurrency exchange’s complaint included 50 specific questions about how various digital assets should be governed. The questions touched on a wide variety of topics and sought a clear direction on several other issues.

Last week, Coinbase stated that the SEC is not providing enough regulatory advice for American businesses engaged in the cryptocurrency industry and that the commission should at the very least specify how these inapposite and inapt criteria are to be adjusted to account for digital assets. Coinbase has been attempting to take preemptive action against the SEC, which announced in March that it anticipated suing the exchange over claims that it was providing unregistered securities products.

In recent months, the commission has intensified its enforcement actions and given warnings to cryptocurrency exchanges about how they conduct their operations in the United States. Coinbase has even received a Wells notice, a letter that normally serves as a warning to a corporation that the SEC may take enforcement action in the future, from the commission.

The corporation has also begun searching for operations outside of the United States due to regulatory uncertainties. Last week, it launched an institutional derivatives platform, Coinbase International Exchange, in Bermuda to offer ether and Bitcoin perpetual features to non-U.S. clients.

At the same time, Citigroup, an American investment bank, has downgraded its opinion of Coinbase shares to neutral and lowered the price goal from $80 to $65 in response to concerns about the continuous regulatory challenges the cryptocurrency exchange is currently facing. According to Peter Christiansen, a Citi analyst, the bank’s current status will remain until the U.S. regulatory framework is more solidified.

The court’s decision giving the SEC a deadline within which to respond to Coinbase’s concerns could nudge the regulatory body to offer some guidance regarding the specific rules that crypto industry actors such as Stronghold Digital Mining Inc. (NASDAQ: SDIG) are to abide by while conducting their routine business activities.

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