San Francisco-based cryptocurrency exchange Coinbase has submitted a letter to the U.S. Securities and Exchange Commission (SEC), criticizing the regulatory body’s proposal to impose regulations on decentralized exchanges (DEXs). This move comes as part of the ongoing public dispute between Coinbase and the SEC.
In the letter, Coinbase’s Chief Legal Officer, Paul Grewel, argued that it is impractical to subject DEXs, such as Uniswap, to the same registration requirements as centralized exchanges. Grewel took to Twitter to express his concerns, stating that the SEC’s proposal is deeply flawed both in terms of its process and substance. He accused the SEC of making unfounded assumptions about its authority in the crypto space while preempting any potential Congressional action.
The letter further emphasized that the SEC’s jurisdiction over an industry does not grant it the power to ban that industry without explicit authorization from Congress. Grewel pointed out that truly decentralized systems operate without a central governing entity responsible for compliance, making it impossible to meet the proposed regulatory demands for DEXs.
According to Coinbase, the SEC’s lack of rigorous economic analysis and its use of subjective policy preferences undermine the legitimacy of the proposed rules. The exchange urged the SEC to reconsider its approach and engage in a more comprehensive evaluation of the economic implications and nuances of decentralized exchanges.
The ongoing clash between Coinbase and the SEC highlights the growing tension between cryptocurrency industry players and regulatory authorities, as both sides grapple with finding an appropriate balance between innovation and investor protection in the evolving digital asset landscape.