The U.S. Securities and Exchange Commission (SEC) recently declined a rulemaking petition submitted by Coinbase Global, Inc. This decision, supported by the Commission, underscores the adequacy of existing securities laws in regulating crypto markets and the importance of preserving the SEC’s discretion in rulemaking.
Upholding Existing Securities Laws for Crypto
The SEC’s decision reaffirms that current securities regulations are applicable to the crypto market. The inclusion of a broad range of instruments under the term “security,” as defined by Congress in the 1930s, encompasses crypto assets. This approach is supported by historical legal precedents, including the Supreme Court’s Howey and Reves decisions, which focus on the economic realities of transactions rather than their labels.
The Howey test, in particular, has been consistently applied to various investment forms, demonstrating its effectiveness in determining if a financial instrument is offered as a security. This legal framework ensures that crypto assets offered as securities receive the necessary disclosures and protections.
SEC’s Role in Crypto Securities Through Rulemaking
The SEC actively engages in rulemaking concerning crypto asset securities and intermediaries. Initiatives like the Special Purpose Broker-Dealers Release and proposed rules regarding crypto asset securities highlight the Commission’s ongoing efforts. These actions, along with enforcement against non-compliant crypto market participants, contribute valuable insights, shaping the SEC’s regulatory approach in this domain.
Importance of Commission Discretion in Rulemaking
The SEC emphasizes the significance of maintaining discretion in setting regulatory priorities, considering the broader financial market. With the crypto market being a relatively small part of the overall capital market, the Commission prioritizes its focus where updated regulation is most needed.
Conclusion: SEC’s Commitment to Investor Protection
The SEC remains open to working with crypto projects and intermediaries that comply with existing laws. The Commission’s commitment to investor protection is evident in its insistence on full, fair, and truthful disclosure, registration, and oversight of intermediaries. The current securities regime effectively governs crypto asset securities, and the SEC’s decision to deny Coinbase’s petition reflects this stance.
