Quick Facts

Coinbase Urges SEC to Reconsider Ban on Staff Holding Cryptocurrencies

As the digital asset landscape continues to evolve, the need for regulatory clarity has never been more pressing. In a recent move, Coinbase, a leading crypto exchange, has urged the US Office of Government Ethics (OGE) to reconsider a rule that prohibits Securities and Exchange Commission (SEC) staff from holding crypto. The company believes that such a restriction hinders the SEC’s ability to effectively regulate the crypto market and understand its intricacies.

A Necessary Reform

Coinbase’s chief legal officer, Paul Grewal, argued in an open letter to OGE Acting Director Jamieson Greer and newly sworn-in SEC Chair Paul Atkins that permitting SEC staff to hold crypto is essential for developing a comprehensive regulatory framework for digital securities. Grewal contended that to regulate technology, one needs to understand it, and to understand it, one needs to use it.

The OGE’s current rule, issued in July 2022, prohibits SEC staff from buying, selling, or otherwise using crypto and stablecoins since they are not “publicly traded securities” and do not qualify for an exception. However, Grewal believes that this restriction creates a conflict of interest for SEC staff, particularly those working on the agency’s Crypto Task Force. By not allowing them to hold crypto, the SEC staff cannot fully understand the technology and its underlying mechanics.

A Roadblock to Effective Regulation

Grewal pointed out that the SEC has been directed by US President Donald Trump to submit recommendations for crypto regulations within 90 days, but-currently, SEC staff cannot use the technology they are making recommendations on. This suggests that the agency’s regulatory framework is, in part, hindered by this restriction. Furthermore, in his letter to SEC Commissioner Hester Peirce, Grewal echoed these sentiments, arguing that the inability to hold crypto is a roadblock for the agency’s Crypto Task Force in creating a regulatory framework.

Waivers: A Possible Solution

Grewal suggested that the SEC could issue waivers to crypto task force members and other staff actively working on task force matters, allowing them to use crypto and evaluate the underlying digital asset technology. This would enable the SEC staff to gain a deeper understanding of the technology and make more informed decisions about regulating it.

A Change in Tone

The SEC’s approach to crypto regulation has been a subject of controversy in recent years. Former SEC Chair Gary Gensler was known for his hardline stance on crypto regulation, spearheading an aggressive regulatory stance that brought upward of 100 regulatory actions against firms. However, following Gensler’s exit and the appointment of a new chair, the SEC has taken a more measured approach. The agency recently dropped lawsuits against several crypto firms, including Coinbase, and plans to do the same with blockchain firm Dragonchain.

Recommendations for Readers

Stay informed: Keep up-to-date with the latest developments in the digital asset space and regulatory changes.

Diversify your portfolio: Consider adding crypto to your portfolio to take advantage of its potential for growth.

Use reputable exchanges: Ensure you are using reputable exchanges, such as Coinbase, to buy and sell crypto.

Stay vigilant: Be cautious of potential scams and fraudulent activities in the digital asset space.

Disclaimer

This article is for informational purposes only and should not be considered as investment or legal advice. The views expressed in this article are those of the author and not necessarily those of the firms mentioned.