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SEC Asks for Additional Time in Coinbase Rulemaking Petition

The U.S. Securities & Exchange Commision (SEC) has requested more time to respond to Coinbase’s plea for regulatory certainty in the crypto space. The SEC stated in a June 13, 2023, letter that it would require an extra four months to address Coinbase’s request for the implementation of new regulations and improved comprehension of the regulatory environment for cryptocurrencies.

The letter was written in response to the court’s order from June 6, 2023, asking the SEC to make it clear if it was rejecting the rulemaking or just needing more time to think it through.

The SEC’s recent statement follows a series of legal filings from both Coinbase and the regulatory agency. Coinbase resorted to filing a writ of mandamus against the SEC after the agency indicated a lack of urgency in addressing Coinbase’s concerns about regulatory clarity. In its legal filing, Coinbase accused the SEC of purposefully disregarding its appeals for well-defined regulations within the cryptocurrency sector.

The petition was filed by Coinbase after the SEC made it clear that it would not entertain the exchange’s request for immediate clarification on cryptocurrency regulations. On May 15, 2023, the SEC responded to a previous petition from Coinbase and said that it was not prepared to comply with the exchange’s demands. The agency emphasized that it was under no obligation to meet the requirements outlined in Coinbase’s petition, asserting that the exchange had requested complex rulemaking within an unreasonably short timeframe.

The SEC’s rejection on May 15, 2023, was a response to a specific action taken by Coinbase in April, urging the agency to provide a definitive “yes or no” response to a petition submitted in July 2022. That 2022 petition consisted of a list of inquiries seeking clarification on the classification of securities and the SEC’s criteria for determining whether an asset qualifies as a security.

Coinbase had previously submitted a petition on March 20, 2023, requesting the exclusion of staking from the SEC’s list of securities.

In its most recent response, the SEC denied the exchange’s writ of mandamus as being without substance and said that it had not yet decided on the petition. However, the agency expected to be able to make a recommendation about Coinbase’s request for rulemaking within the following 120 days.

Paul Grewal, chief legal officer of Coinbase, commented on the SEC letter on Twitter, calling it a “fallacy” that the agency had not made any decisions about new laws. Grewal pointed out that the letter overlooked explicit statements from SEC Chair Gary Gensler, who had stated that the SEC had no intentions of issuing new rules.

Given the SEC’s hesitancy to establish a more precise and comprehensive regulatory framework, its actions raise concerns, particularly as the agency has also taken significant measures against Binance and Coinbase on allegations of securities violations.

The petition filed by Coinbase would help all industry actors, such as Stronghold Blockchain Mining Inc. (NASDAQ: SDIG), because the current regulatory uncertainty hampers innovation and growth within the industry.

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