Coinbase challenges the SEC’s new rule, saying it could affect innovation by unfairly regulating decentralized exchanges (DEXs).
Paul Grewal, Coinbase’s chief legal officer, notes the SEC’s proposal is poorly researched and could impose unfair policies on DEXs.
Coinbase warns that the SEC's idea could affect the DEX market after the SEC failed to assess the outcome.
Coinbase, the leading U.S.-based cryptocurrency exchange, has opposed a rule offered by the Securities and Exchange Commission that will control decentralized exchanges. Coinbase submitted concerns over the agency’s proposal to expand the definition of exchange.
Coinbase Chief Legal Officer Speaks Out
The policy would put DEXs to the same needs as traditional financial exchanges. This move has brought opposition from Coinbase, which claims that the rule could strain innovation in the cryptocurrency space.
Paul Grewal, Coinbase’s Chief Legal Officer, expressed the exchange’s concerns on social media platform X, challenging the SEC’s approach as unfair and poorly researched. Saying that the SEC’s proposal lacks critical analysis, rests on assumptions, fails to show that there is any problem in need of regulation, and vastly overstates the proposal’s purported benefits.
https://twitter.com/iampaulgrewal/status/1823005008100753637
In a response letter, Grewal asked the SEC to withdraw the rule and check its approach, noting that the current idea needs to understand how decentralized exchanges operate. He warned that the rule, if passed, could include unfair policies on DEXs, affecting their growth and innovation.
The SEC aims to bring decentralized exchanges under the same control as traditional financial exchanges. The rule would require DEXs to register as trading systems with the SEC.
A response by Coinbase explained that the proposal is unfair to its platform since the SEC supports traditional exchanges.
Potential Impact on the Cryptocurrency Industry
In its response, Coinbase noted the possible negative outcome of the SEC’s proposal for the cryptocurrency industry and its users. Grewal said the rule could affect the DEX market by introducing different policies on decentralized platforms. He also questioned the SEC’s failure to analyze the rule’s impact, saying that the agency checked the regulation's benefits while ignoring its potential harms.
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