The United States Chamber of Commerce has damned the Securities and Exchange Commission (SEC) for its “haphazard, enforcement-based approach” to regulating the cryptocurrency industry on American soil. In an amicus brief filed to the U.S Court of Appeals on May 9, the U.S Chamber of Commerce favoured Coinbase and accused the SEC of deliberately creating a precarious and uncertain landscape for crypto companies operating in the country.
The brief highlights that digital assets are “securities” under federal law in the United States and It has immense implications for every person involved in the $1 trillion digital-asset economy, and it is the threshold regulatory question. It further added that the Securities and Exchange Commission, despite proclaiming itself the primary regulator of digital assets, has refused to resolve this threshold question.
The Commission has instead offered a series of one-off enforcement actions, supplemented by public speeches and other statements that one commissioner broadly described as confusing, unhelpful, and inconsistent. It has refused to engage in any rulemaking or other systematic process to explain what its claimed authority means. By eschewing all formal, prospective processes, the SEC has also largely disabled the federal courts from reviewing the extremely contestable legal arguments underlying its expansive claimed authority.
The argument reads that the SEC’s delay is causing great economic harm and regulatory uncertainty brings hurdles in economic growth and innovation. It further added that the SEC’s refusal to respond to Coinbase’s rulemaking petition or otherwise engage in rulemaking has destabilized the regulatory environment for digital assets. It also mentioned that the SEC’s approach abridges regulated parties’ right to fair notice and the public’s right to notice and comment.
Further, the US Chamber of Commerce asked the SEC to respond to Coinbase’s’ April 25 complaint, which seeks to compel the regulator to reply to its “petition for rulemaking” and provide clearer regulatory guidelines for crypto firms operating in the country. The petition mentioned that Coinbase Global is filing this petition with the U.S. Securities and Exchange Commission requested that the commission propose and adopt rules to govern the regulation of securities that are offered and traded via digitally native methods, including potential rules to identify which digital assets are securities.
Digitally native securities are recorded and transferred using distributed ledger technology and do not rely on centralized entities or certificated forms of ownership that characterize traditional financial instruments. It further added transactions in these securities are executed and settled in ideal time, permanently recorded on blockchains, and visible with equal access to all market participants.
Remarkably, the Chamber of Commerce also called out the financial regulator for failing to provide a clear answer to the question of which, if any, of the roughly 20,000 digital assets currently in existence should be deemed “securities” under Federal Law.
The earlier petition mentioned that the U.S. currently does not have a functioning market in digital asset securities due to the lack of a clear and workable regulatory regime. Digital assets that trade today overwhelmingly have the characteristics of commodities. Coinbase, like many other exchanges, has intentionally and conscientiously steered well clear of securities to ensure that canto operates in full compliance with applicable laws and regulations.
However, new rules facilitating the use of digital asset securities would allow for a more efficient and effective allocation of capital in financial markets and create new opportunities for investors. Globally, many jurisdictions are actively pursuing regulations. However, new rules facilitating the use of digital asset securities would allow for a more efficient and effective allocation of capital in financial markets and create new opportunities for investors.
