In simpler terms, a court has decided that the Securities and Exchange Commission (SEC) needs to clearly explain their reasons for not allowing Coinbase’s request for regulations specifically concerning cryptocurrencies.
After years of grappling with ambiguity, I find myself making this move due to the ongoing dialogue between regulators and the cryptocurrency community regarding the absence of definitive rules.
Judicial Rebuke
According to a decision made public on January 13, the court found fault with the Securities and Exchange Commission’s (SEC) methodology, labeling it as “unreasonable” and insisting that the commission provide clearer guidance regarding the regulations governing digital assets.
Since we find the SEC’s decision too summary and lacking in reasoning, and therefore potentially unreasonable, we partially approve Coinbase’s request and send it back to the SEC for a more detailed explanation.
Instead of mandating fresh guidelines for the sector, the three-judge panel underlined the significance of transparency without explicitly doing so. Judge Thomas Ambro, who penned the decision, pointed out that government bodies like the SEC could be compelled to establish rules only when a delay poses a risk to human lives. In his view, the urgency for crypto regulations had not reached such a critical level yet.
Judge Stephanos Bibas, the sole Republican member of the panel, noted that the financial regulatory body should clarify their reasoning behind not establishing regulations for the cryptocurrency sector. He emphasized that although rules may not be essential to resolve issues related to digital currencies, it is crucial for the Securities and Exchange Commission (SEC) to express their stance on these assets.
Additionally, he advised the commission against offering another vague response when addressing the Coinbase issue, as they have a track record of delivering unclear answers.
Coinbase Responds
Paul Grewal, Coinbase’s Chief Legal Officer, praised the ruling, emphasizing the court’s acknowledgement of the Securities and Exchange Commission’s weak justification. He further commended Judge Bibas for bringing attention to potential constitutional issues that may arise from the application of regulations without clear instructions in a retroactive manner.
The chief executive of the exchange, Brian Armstrong, added his thoughts as well, expressing appreciation for the judiciary’s part in safeguarding constitutional principles. In a social media message, he highlighted the persistent harm brought about by regulatory ambiguity, emphasizing the significance of preserving freedoms that impede excessive government intervention.
Just under a week remains before SEC Chair Gary Gensler’s departure. Despite facing significant disapproval within cryptocurrency circles due to his “regulation by enforcement” strategy, Gensler has repeatedly stated his intention to maintain this approach when overseeing the sector.
His leaving happens at the same time as the inauguration of the Donald Trump administration. The newly elected president has hinted at a move towards less stringent cryptocurrency regulations with Paul Atkins, his chosen candidate for the SEC’s highest position, suggesting such changes.
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2025-01-14 16:48