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Shifts in SEC’s Stance Towards Coinbase Signal New Regulatory Era

On Friday, a prominent figure at Coinbase announced a significant turn in the regulatory landscape, suggesting that the “war against crypto” is coming to an end, at least concerning Coinbase’s operations. This statement was made by Coinbase’s Chief Legal Officer, Paul Grewal, in light of recent developments with the US Securities and Exchange Commission (SEC).

Reports indicate that the SEC is contemplating withdrawing its lawsuit against Coinbase, marking a shift in its approach to cryptocurrency regulations under the new administrative policies introduced by former President Donald Trump. The SEC previously initiated legal action against Coinbase in 2023, accusing it of operating an unregistered securities exchange, broker, and clearing agency. Moreover, the SEC accused the firm of failing to comply with necessary registration for its staking-as-a-service offerings.

The SEC’s lawsuit alleged that since at least 2019, Coinbase generated substantial profits while allegedly facilitating the trading of crypto asset securities unlawfully. The commission emphasized that such operations deprived investors of essential protections, including oversight from the SEC, adherence to recordkeeping mandates, and safeguards against conflicts of interest.

These actions were characterized by the SEC as a necessary measure to hold Coinbase accountable and ensure that it complies with existing securities laws, similar to other entities operating within the financial markets. The agency’s goal was to safeguard consumers by enforcing rules designed to protect their investments.

Gary Gensler, the former SEC Chair and a critical figure in the regulatory landscape for cryptocurrencies, had warned that Coinbase was intentionally evading compliance standards, placing investors at increased risk. Gensler’s comments underscored concerns that such disregard for regulations could facilitate nefarious practices, including insider trading, which has previously led to settlements amid allegations of market manipulation.

Gensler has been vocal about the importance of adhering to established regulatory frameworks, asserting, “You simply can’t ignore the rules because you don’t like them or because you’d prefer different ones: the consequences for the investing public are far too great.” This stance emphasizes the critical balance that regulators aim to achieve in fostering market innovation while ensuring investor protection.

With the evolving regulatory environment, the potential withdrawal of the lawsuit against Coinbase could signify a more accommodating stance from the SEC, which would have broader implications for the cryptocurrency industry. As the dialogue between regulatory bodies and cryptocurrency firms continues, stakeholders will be closely monitoring how these changes may affect future operations and the overall landscape of digital asset trading in the United States.

Source
arstechnica.com