- Coinbase, the largest cryptocurrency exchange in the United States, has initiated legal action against the Securities and Exchange Commission (SEC) and the Federal Deposit Insurance Corporation (FDIC) over non-compliance with information requests in closed cryptocurrency cases.
- The filings at the United States District Court for the District of Columbia indicate that Coinbase is seeking to enforce the Freedom of Information Act (FOIA) to compel the SEC and FDIC to respond to specific information inquiries from industry stakeholders.
- Coinbase’s primary argument revolves around the SEC’s newly asserted broad authority over the crypto industry, which the exchange claims lacks grounding in existing securities laws.
Coinbase challenges the SEC and FDIC for failing to comply with information requests, adding to the ongoing regulatory scrutiny over the crypto space.
Coinbase Files Lawsuit Against SEC and FDIC
Coinbase alleges that the SEC has adopted an unprecedented stance, asserting extensive control over the burgeoning cryptocurrency sector. This new approach, according to Coinbase, not only lacks clear legal foundations but also represents an enforcement strategy aimed at undermining the industry. The exchange has criticized the concerted efforts by the SEC and FDIC to restrict banking services for cryptocurrency firms, describing these actions as detrimental to the digital asset economy.
In collaboration with History Associates, a professional services research firm, Coinbase has demanded that the SEC substantiate its authority by providing documentation related to three specific investigations of crypto firms and entrepreneurs. Notably, one such investigation centers on Ether, the native asset of Ethereum, which the SEC had previously indicated was not a security in 2018.
Despite the SEC recently concluding its investigation into Ethereum 2.0 — the enhanced proof-of-stake network — suggesting Ether remains classified as a non-security, the agency has withheld documents from the other closed cases. Coinbase asserts that the SEC’s refusal to release these records contravenes its obligations under the FOIA.
“The SEC’s evolving and ambiguous interpretation of securities laws fails to provide the clear guidance required by due process, forcing regulated entities to second-guess if their operations might be reclassified as securities transactions, subjected to probes, sanctions, and retroactive penalties,” Coinbase emphasized.
SEC’s Continuing Legal Battle with Coinbase
Coinbase’s Chief Legal Officer, Paul Grewal, has disclosed that the FDIC has also been non-responsive to requests for information regarding directives instructing financial institutions to halt crypto-related services. Grewal pointed out that the FDIC’s Office of Inspector General previously criticized such measures, arguing that they hinder financial innovation and progress in the crypto sector.
“Regulating in this manner is ineffective and undermines government transparency. We expect more from our financial regulators and appreciate the Court’s attention to these critical matters. We will continue to keep the public informed about the developments,” stated Grewal.
Meanwhile, the SEC is actively litigating against Coinbase, contending that the exchange operates without the necessary registration to function as a securities trading platform.
Conclusion
In summary, Coinbase’s lawsuits against the SEC and FDIC highlight ongoing tensions between regulatory bodies and the cryptocurrency industry. The outcome of these legal battles could set significant precedents for the regulatory landscape of digital assets. As these cases unfold, stakeholders and observers alike are eager to see clearer regulatory guidelines to facilitate a more transparent and innovation-friendly environment.
