Coinbase has petitioned U.S. ethics regulators to lift the SEC employees’ ban on owning and engaging with cryptocurrencies. The top cryptocurrency exchange has argued that this restriction will obstruct the creation of clear and informed regulation of the digital asset ecosystem.
In letters that have since been made public, Coinbase’s chief legal officer, Paul Grewal, requested the OGE and new SEC leadership to reconsider the current policy. Grewal believes that the SEC staff should understand the digital assets that they handle and be able to control them due to their working with them.
The ongoing ban, he pointed out, is a big challenge, mainly for members of the SEC’s Crypto Task Force, who have to be involved in the drafting of regulations. According to Grewal, there is a disconnect between regulators and the asset. It is impossible to create smart rules around something that one doesn’t use or understand.
Because of OGE Legal Advisory 22-04 in July 2022, SEC employees are barred from buying, selling, or holding cryptocurrencies and stablecoins. These assets do not qualify for exemptions because they are not considered “publicly traded securities,” unlike stocks.
According to Coinbase, the SEC can act right away by releasing waivers for employees working on crypto regulation, while the OGE must formally revoke the rule. The company asserts that these waivers bear resemblance to similar measures implemented in other contexts to safeguard knowledge.
The SEC is under pressure because it has 90 days to help put together a policy on cryptocurrency at the federal level. But, Grewal said, SEC staff still can’t use the technologies they must assess and regulate. This would appear to be unproductive from Coinbase’s perspective.
Since the exit of former SEC Chair Gary Gensler, whose approach to enforcement actions was criticized as excessive, the regulatory agency is dialing back its targets. Coinbase is reportedly hoping that the leadership transition will pave the way for more realistic and informed regulations.
