Regulation
Coinbase Sues SEC, Seeking Clearer Guidelines on Cryptocurrency Regulation
In a recent development, Coinbase, the largest cryptocurrency exchange in the United States, has started a legal offensive against the Securities and Exchange Commission (SEC) and the Federal Deposit Insurance Corporation (FDIC).
The lawsuits, filed in a U.S. District Court in Washington, D.C., seek access to internal records that would shed light on what Coinbase describes as a “deliberate and concerted effort” by regulators to pressure banks to deny cryptocurrency firms access to the federal banking system.
Coinbase Challenges SEC and FDIC
Coinbase insists that financial regulators, including the SEC, FDIC and Federal Reserve Board, have long sought to thwart the digital resources sectorThe exchange is calling for transparency from the federal government, demanding clarity on the regulatory landscape surrounding cryptocurrencies.
Coinbase’s lawsuit follows its previous attempts to obtain information through the Freedom of Information Act (FOIA) regarding three SEC investigations into cryptocurrency companies and entrepreneurs between 2018 and 2024, including the recently concluded investigation into the blockchain network of Ethereum.
By obtaining the requested information, the exchange hopes to better understand the evolution of the SEC’s position on digital assets over the years.
The company also seeks details about “suspension letters” sent by the FDIC to certain banks between March 2022 and May 2023, which requested a temporary suspension of any activities related to cryptocurrencies until further guidance can be provided on the associated risks.
Following a report from the FDIC Office of Inspector General, these letters came to light, outlining the agency’s strategies for addressing cryptocurrency risks. Despite being legally entitled to the information requested under the FOIA, Coinbase claims that both the SEC and FDIC have denied it access.
This lawsuit against the SEC marks the second time this month that the agency has faced it legal action for noncompliance with FOIA requests. The American Securities Association sued the SEC on June 6 seeking documents related to its investigations into record-keeping practices at major Wall Street firms.
Regulatory obstacles
Coinbase alleges that the SEC and FDIC have cited similar reasons for denying access to the requested information, including concerns that disclosure could compromise ongoing investigations and enforcement actions against other entities.
The exchange specifically refers to “Operation Chokepoint 2.0,” a term used in the cryptocurrency industry to describe what they perceive as a “coordinated effort” by financial regulators to limit or deny crypto firms access to banking services, similar to the original “Operation Chokepoint” initiative in 2013.
Coinbase’s lawsuits seek to uncover whether SEC and FDIC leaders employed coordinated pressure tactics to stifle the $2 trillion digital asset industry’s access to the federal banking system.
The exchange alleges the SEC’s lack of consistent guidance on enforcement of securities laws digital resources it is harmful for operators in the sector.
While Coinbase hopes these lawsuits will provide insight into the SEC’s enforcement actions against the exchange, which is currently on trial in federal court in New York, it may experience delays in obtaining the requested information.
The Government Accountability Office recently reported a significant backlog of FOIA requests attributed to the growing volume and complexity of information sought by individuals and companies in recent years.
As Coinbase continues its legal battle, the cryptocurrency industry will be closely watching the outcome of these lawsuits, as they could potentially impact the regulatory landscape and contribute to greater transparency around crypto regulations and their enforcement.
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