Coinbase, in a petition to the US Securities and Exchange Commission (SEC), has sought clarity on regulations surrounding the trading of digital assets. The crypto exchange requested the regulator to provide rules to identify which digital assets it considers to be securities.
The petition described digitally native securities as being recorded and transferred via distributed ledger technology without reliance on centralized certified forms of ownership that characterize traditional financial instruments. It stated that transactions are executed and settled in real-time, permanently recorded on blockchains, and visible with equal access to all market participants. The petition highlighted that many of the SEC’s rules governing traditional assets are incomplete and unsuitable.
Coinbase believes that the US does not currently have a functioning market in digital asset securities because of a lack of a clear and workable regulatory regime. Gary Gensler, the SEC chair, says most digital assets qualify as securities. As such, it requires registration with the regulator. However, the watchdog has refused to positively identify each token that fits the securities definition. SEC argues that it has done the same for other markets as well. It has labeled nine tokens, with the largest being an Ethereum-based token called Amp, as securities.
Carolyn M. Welshhans, Acting Head of SEC’s Crypto Assets Unit, in a statement, said the defendants (former Coinbase product manager Ishan Wahi, his brother, and a friend of insider trading) collectively earned over $1.1 million in illegal profits. They had engaged in an alleged insider trading scheme that used material, non-public information to trade ahead of Coinbase listing announcements.