Coinbase Urges Policy Change on SEC Crypto Ownership
Coinbase has officially called on U.S. regulators to remove the ban that bars Securities and Exchange Commission (SEC) employees from purchasing, selling, or owning cryptocurrencies that are not securities.
The crypto exchange argues that the current policy robs the SEC of its ability to regulate effectively the rapidly developing digital asset space because it prevents staff from gaining firsthand experience with the technology they are tasked with overseeing.
Current Ban Hinders Effective Crypto Regulation, Coinbase Argues
In April 22 letters, Coinbase Chief Legal Officer Paul Grewal wrote to SEC Chair Paul Atkins and the U.S. Office of Government Ethics, expressing concerns over the existing prohibition. Grewal stressed that the regulators must be able to engage directly with the technologies they oversee, especially as the crypto space keeps advancing and innovating.
The timing of Coinbase’s request is crucial. President Trump’s executive order calls for regulatory agencies, like the SEC, to develop recommendations to advance American leadership in digital finance within 180 days. Grewal further stated that nearly half of the period has elapsed, but SEC staff members are still banned from leveraging the same technology they must understand to regulate.
Coinbase Proposes Pragmatic Solutions and Policy Revisions
To address the challenge, Coinbase invoked the Office of Government Ethics to rescind and update Legal Advisory 22-04, prohibiting SEC employees from trading crypto assets. The company proposed workable solutions, such as issuing waivers to members of the SEC Crypto Task Force and other concerned personnel.
Grewal suggested a more nuanced approach to handling possible conflicts of interest. Instead of an outright ban, SEC employees could be allowed to own or trade cryptocurrencies with strict oversight, provided their actions cannot be shown to have a quantifiable effect on the price of such assets. This would be mirroring techniques used in similar regulatory environments.
By facilitating limited and conditional ownership, Coinbase is convinced that SEC employees would gain greater, more useful insights, which in turn would result in more effective and well-informed regulation.
Aligning Regulation with Market Realities
Coinbase’s missives also cite Office of the Inspector General reports, which emphasized regulators must continue to advance their knowledge, regulations, and surveillance tools, as the market continues to develop. Grewal asserted that modernizing the SEC’s crypto policy would not only enhance the effectiveness of regulations but also enable the wider aspiration for U.S. leadership in the digital finance sector.
Coinbase believes that lifting the ban is an important step towards regulatory clarity and regulation of innovation in the crypto arena.
