Coinbase, the U.S. crypto exchange, has won an initial victory in its bid to force the SEC to explain how it determines when cryptocurrencies should be considered securities. A federal appeals court has given the agency 10 days to explain why it did not respond to Coinbase‘s request for rules on conducting digital asset transactions. However, this does not necessarily indicate that the SEC will comply quickly, as it has been trying to exert its authority over the cryptocurrency market this year.
Coinbase has asked a federal court to force the SEC to respond to its petition filed last year asking for formal rulemaking within the digital assets sector. Coinbase filed an Administrative Procedure Act challenge against the SEC last week, asking the Third Circuit Court of Appeals to order the SEC to provide “regulatory clarity” around how existing securities laws might apply to the digital asset sector.
The US regulator may not provide a substantive response by the deadline and could even move to dismiss the action. Coinbase has argued that federal law requires the SEC to respond to its rulemaking petition “within a reasonable time.” If the SEC denies the exchange’s initial request for a clear definition, Coinbase may take the matter to court. Meanwhile, the SEC is likely to keep its response vague. Due to regulatory uncertainty, Coinbase has launched a new crypto exchange in Bermuda for institutional clients based outside the United States.
