Yesterday, Coinbase (NASDAQ:COIN) announced that it had filed a “limited action” against the Securities and Exchange Commission (SEC) as it has ignored its petition for clearly defined digital asset rules. The SEC is statutorily required to respond to a petition within a reasonable amount of time. It has been almost a year since Coinbase submitted the petition, and the digital asset firm is, understandably, getting impatient.
CI received a comment on the legal action from Fergal Parkinson, Director of TMT Analysis, who noted that crypto has struggled to establish credibility and convince regulators that their security measures are sufficient to stand up to scrutiny and financial services demand. Parkinson said the fact that Coinbase is aggressively lobbying for regulation means the tide has turned for crypto firms who are “increasingly aware of how crucial legislation is to the success of the industry.”
“This is a hugely significant step and the world is watching for the SEC’s response,” said Parkinson. “Consumers have long made clear that security concerns are a major factor preventing potential investors from fully embracing crypto – almost half (45%) of people believe that crypto will never become mainstream unless security and regulation are improved. The SEC – alongside other global regulators – needs to implement crypto legislation to allow the industry to fulfil its potential as a truly viable, global alternative to the current monetary system and offer consumers increased choice at a time when global inflation remains rampant.
Parkinson added that to build confidence and scale the digital asset market, firms must incorporate more stringent anti-fraud protocols whether legislation is coming or not.
“Measures such as number verification are a simple yet vital step in fighting fraud and boosting consumer confidence in the market. Embracing this cost-effective approach can ensure that crypto firms have the security measures in place whenever legislation does come in.”
Part of dealing with the SEC is the overwhelming amount of politics involved in what they decide to do. As the digital asset sector has largely been divided down the line, with most Democrats against it and most Republicans for it, this tends to color the SEC’s decisions. Note, everyone wants stringent rules that provide mandated protections, but the crypto industry wants to know what the rules are for digital assets that blur the lines of securities, commodities, currency, and utility.