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Coinbase, the largest cryptocurrency exchange in the US, has been in a legal battle with the Securities and Exchange Commission (SEC) over regulatory clarity for trading digital assets. The ongoing legal battle has led to a lack of clarity in the cryptocurrency industry, causing confusion and uncertainty for businesses and investors alike.
Coinbase filed a lawsuit in April requesting that the court compel the SEC to publicly disclose its stance on a petition submitted several months prior. The petition posed 50 specific questions about the regulatory treatment of certain digital assets, covering topics such as how tokens are classified as securities and seeking clarification on various other matters.
Despite the lack of public response to the petition, the SEC has increased enforcement and issued warnings to crypto exchanges. The commission has even issued a Wells notice to Coinbase in the past, warning the company that the SEC may follow with an enforcement action.
The US Court of Appeals for the Third Circuit has responded to the complaint against the SEC, marking a significant development in the ongoing legal battle. The court's response was a text-only order, instructing the SEC to respond to Coinbase's writ of mandamus within ten days.
A writ of mandamus is a court order that compels an inferior government official to fulfil their official duties properly. The court also granted Coinbase the right to file a reply to the SEC's response within seven days of the filing.
Due to the ongoing regulatory issues faced by Coinbase, US investment bank Citigroup has downgraded the shares of the crypto exchange from "buy" to "neutral" and has also lowered its price target. The bank cited "too many unknowns" as the reason for this downgrade. According to Citi analyst Peter Christiansen, the downgrade will remain in place until the regulatory "rules of the road" are better established in the United States.
The legal battle between Coinbase and the SEC highlights the need for greater regulatory clarity in the cryptocurrency industry. As the battle continues, it remains to be seen how the regulatory landscape for digital assets will evolve in the United States and beyond.
Disclaimer: This article is provided for informational purposes only, from my own research. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
