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Paradigm, a cryptocurrency investment company led by Coinbase co-founder Fred Ehrsam, has filed a motion to file a lawsuit in support of Coinbase’s case against the U.S. Securities and Exchange Commission (SEC).
In March, Coinbase received a Wells notice from the SEC, which could lead the financial regulator to take enforcement action against the American cryptocurrency exchange. In response, Coinbase filed a complaint with the SEC in April, demanding the commission provide clear regulatory guidance for crypto firms operating in the country.
Paradigm’s filing on May 10 supported Coinbase’s lawsuit against the SEC, saying the firm has a “strong interest” in seeing the regulator respond to its delays with the exchange’s petitions. According to Paradigm, such regulatory uncertainty could lead to “a virtual ban on digital asset trading platforms” with no clear path to register with the SEC.
“The SEC has not provided clear rules and guidelines for digital assets and digital asset trading platforms, and yet it continues to seek enforcement action against digital asset market participants,” Paradigm said in a statement. “Moreover, by refusing to even respond to Coinbase’s rulemaking motion, the SEC is avoiding legal review and prolonging uncertainty for market participants.”
Seems a bit odd for a regulator to choose # of enforcement actions as their primary metric? https://t.co/s2gkFpcvcp
— Fred Ehrsam (@FEhrsam) April 17, 2023
Many in the cryptocurrency industry have criticized SEC Chairman Gary Gensler’s handling of firm registrations, arguing that his “come and talk to us” approach does not reflect reality. In his response to the Wells notice, Coinbase General Counsel Paul Grewal said that Coinbase met with SEC representatives “more than 30 times over a nine-month period” but received little to no feedback.
Paradigm added:
“Unsurprisingly, the SEC’s actions hurt a nascent industry and sowed confusion among countless firms unable to agree with the SEC’s view of the law or challenge that view in court.”
Related: ‘We screwed up’ – Coinbase CLO responds to outrage after exchange linked Pepe to hate groups
The legal battle between Coinbase and the SEC began when many U.S. lawmakers raised concerns that a lack of regulatory clarity at home, coupled with cryptocurrency-friendly jurisdictions abroad, could lead to an outcome of innovation. In a May 10 hearing between the U.S. House Financial Services Committee and the Agriculture Committee over gaps in digital asset regulation, some lawmakers pointed to the European Union structure for cryptoasset markets, or MiCA, rather than the patchwork of requirements in the United States.