Coinbase has formally requested that U.S. regulators lift the prohibition preventing Securities and Exchange Commission (SEC) staff from buying, selling, or using cryptocurrencies that are not securities.
In letters dated April 22, Coinbase Chief Legal Officer Paul Grewal wrote to both SEC Chair Paul Atkins and the U.S. Office of Government Ethics and argued that the current policy hampers regulators’ ability to effectively oversee the cryptocurrency industry.
Current policy undermines effective regulation, Coinbase argues
In the letters, Grewal points out that the prohibition comes at a particularly problematic time. President Trump has directed the SEC and other agencies to submit recommendations for regulatory proposals to advance American digital financial leadership within 180 days via executive order.
The Coinbase CLO notes that nearly half of this timeframe has already passed, yet staff members still cannot use the technology they are tasked with regulating.
Grewal argues that understanding technology requires using it and wrote that the current situation impedes the SEC Crypto Task Force’s ability to help pave the path for regulatory clarity.
The company calls for the Office of Government Ethics to rescind and update Legal Advisory 22-04. This prohibits commission staff from buying, selling, or otherwise using crypto assets.
The letter to SEC Chair Atkins suggests practical solutions. One option is to issue waivers to Crypto Task Force members and other staff actively working on cryptocurrency matters. According to Grewal, this approach would be consistent with measures already taken in “commensurate advisory situations.”
It would also allow Commission staff directly responsible for implementing cryptocurrency regulations to properly understand and evaluate the underlying technology.
Coinbase proposes a more nuanced approach to potential conflicts of interest. The exchange suggested that SEC staff could own cryptocurrencies under certain conditions. Grewal contends that the current blanket prohibition is particularly problematic given that most crypto asset activity does not involve securities.
As an alternative, Coinbase suggests the Commission could clarify that certain cryptocurrency holdings would not have a direct and predictable effect on the value of those assets.
Grewal notes that providing such relief would align with views expressed by the Office of the Inspector General. It stated that the commission’s ability to remain an effective regulator needs continuous monitoring of the market environment and appropriate adaptation of expertise, rules, regulations, and oversight tools.
