Coinbase petitions SEC to clarify crypto rules

The American cryptocurrency exchange Coinbase has petitioned the country’s securities regulatory authority to clarify the regulations surrounding the trading of digital assets.

In its petition, Coinbase also requested that the Securities and Exchange Commission issue rules to identify which digital assets it considers to be securities.

The petition defines “digitally native securities” as being “recorded and transferred using distributed ledger technology”, without reliance on centralized certified forms of ownership that typically characterize traditional financial instruments. In addition, transactions are “executed and settled in real time, permanently recorded on blockchains, and visible with equal access to all market participants.”

Because of these definitive characteristics, which classify a “paradigm shift from existing market practices,” the petition argues that many of the commission’s rules for traditional assets are “both incomplete and inappropriate.” Accordingly, the petition declares that “the United States currently does not have a functioning market for digital securities due to the lack of a clear and workable regulatory regime.”

In addition to questions about classification, Coinbase also offered a list of issues it said the SEC should consider and seek a public hearing on.

SEC’s role

According to the SEC, under current chairman Gary Gensler, most digital assets qualify as securities and therefore require registration with the authority. Currently, it has refused to positively identify every token that fits the security definition, and claims that it also fails to do so for other markets.

Nevertheless, around nine tokens have been labeled as securities by the regulator. Among the nine tokens identified, the largest is an Ethereum-based token called Amp, with a market cap of around $700 million, according to CoinGecko. The tokens were revealed in a complaint filed this week, accusing former Coinbase product manager Ishan Wahi, his brother and a friend of insider trading.

“In nearly a year, the defendants collectively made over $1.1 million in illegal profits by engaging in an alleged insider trading scheme that repeatedly used material, non-public information to trade in advance of Coinbase IPO announcements,” according to a statement from Carolyn M. Welshhans, Acting Head of the SEC’s Crypto Assets Unit.

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