Coinbase calls for SEC to take steps to clarify digital asset regulation as Trump era shifts regulatory outlook

Coinbase made several recommendations to the U.S. Securities and Exchange Commission to clarify its authority over the crypto asset market as the agency moves toward a significantly different direction under the Trump administration and as Congress forges ahead.

In a filing posted on Thursday morning, Coinbase detailed steps the SEC could take, which could come in the form of no-action relief, guidance or interpretations. 

SEC Commissioner Hester Peirce asked for input in February on how her newly created crypto task force should approach crypto. Peirce posed questions about what a future taxonomy could look like, safe harbors and when secondary trading would fall under the SEC's authority. Over 25 individuals and firms have weighed in, with Coinbase being the latest, ahead of the first in a series of crypto task force roundtables scheduled for Friday. 

Nearby in Washington, Congress is mulling over its own approach to regulating crypto. Just last week, the Senate Banking Committee voted to advance a stablecoin bill amid hopes to have both stablecoin and market structure bills signed into law by the end of the year. 

The SEC has also been busy since the Trump administration took office in January, drastically changing direction compared to former SEC Chair Gary Gensler's leadership. Over the matter of just a few weeks, the agency has rescinded controversial crypto accounting guidance, dropped enforcement actions against major crypto industry players, re-examined rules affecting crypto, created Peirce's crypto task force and issued a statement on memecoins . 

"My sense is Congress, the administration, the regulators, understand there's a degree of urgency to try to provide clarity in these markets after four wasted years where the regulators seemed intent on adding to the confusion," said Faryar Shirzad, chief policy officer at Coinbase, in an interview with The Block. 

The recommendations

Coinbase had four main recommendations for the SEC. One recommendation looked to clarify that digital assets that "do not convey any rights in a business enterprise are not securities," and that instead those would be "digital commodities."

Coinbase defines those as "fungible digital assets with no claim to a business enterprise and whose value is primarily determined by its intrinsic utility or simply by market demand and speculation" and said it would encompass assets such as network tokens, NFTs and memecoins, among others. On the other hand, "digital securities" would be a tokenized version of traditional securities such as debt and equities, Coinbase wrote. 

"By thinking of it that way, it addresses a lot of the confusion that I think Gary Gensler tried to sow for his tenure as head of the agency, which is to try to conflate those two categories," Shirzad said. 

Coinbase also asked the SEC to acknowledge that Congress should define "the appropriate regulatory treatment of digital assets where ambiguity persists." Stablecoins, though, should be considered outside of the SEC's purview as Congress works on legislation, the exchange said in the filing. 

"Particularly where Congress has already got a process underway to address a critical issue, of ambiguity or uncertainty in the regulations, the agency should, and they typically do defer to Congress, to exercise its legislative power and provide essentially the law of the land for the agencies to follow," Shirzad said. 

Congress, though, has to step in and define federal agencies' jurisdictions, Shirzad later added. 

Coinbase's two other main recommendations include asking the SEC to clarify that "secondary market transactions in a digital commodity are not securities transactions" and to focus on allowing stakeholders to tokenize traditional securities, such as tokenized debt. 

The SEC's new approach to crypto is vastly different than under the Biden administration when former SEC Chair Gensler led the agency. Gensler said that most cryptocurrencies are securities, falling under the SEC's jurisdiction, and called for crypto platforms such as Coinbase to register with the agency.

"The thing that we've always wanted from the agency was an opportunity to be heard and have all the stakeholders be a part of the deliberative process of figuring out how to regulate these markets and to provide clarity to market participants," Shirzad said.