US SEC Commissioner Hester Peirce has spoken out following the dismissal of the civil enforcement action against Coinbase. The case, which accused the cryptocurrency exchange of failing to register as a securities platform, was dropped with prejudice on February 27. Hester Peirce, known for her pro-crypto stance, expressed her disagreement with the initial lawsuit, criticizing the SEC’s regulatory approach toward the crypto industry.
US SEC Hester Peirce Criticizes Regulation by Enforcement
US SEC Commissioner Hester Peirce has stated that she did not support the enforcement action against Coinbase, arguing that it was part of a broader SEC strategy to regulate the crypto industry through enforcement rather than formal rulemaking. She emphasized that regulatory clarity should come from the SEC’s policy divisions, not from enforcement actions.
According to Peirce, the previous SEC leadership’s decision to rely on enforcement created uncertainty, which she believes harmed the American public and the crypto industry. She argued that the unclear regulatory environment discouraged law-abiding innovators while allowing bad actors to exploit the system.
US SEC Commissioner Hester Peirce stated,
“Environments in which the law is unclear are havens for bad actors and hostile territory for law-abiding people legitimately trying to solve society’s problems and meet its needs.”
Impact on the Crypto Industry and Legal Costs
US SEC’s Hester Peirce argued that the SEC’s enforcement-heavy strategy led to costly legal battles for crypto companies, diverting resources away from innovation. She noted that instead of focusing on product development, many industry participants were forced to navigate complex legal frameworks to avoid regulatory penalties.
The enforcement action against Coinbase focused on the exchange’s listing of tokens that the SEC claimed were unregistered securities under the Howey Test.
US SEC Commissioner Hester Peirce criticized the SEC’s broad interpretation of the Howey Test, saying it created confusion within the industry. She stated that token issuers and other stakeholders were left to interpret regulatory intentions from hints in various SEC complaints.
New Approach with the Crypto Task Force
The dismissal of the Coinbase case coincides with the SEC’s decision to adopt a new regulatory approach. The Commission has established a Crypto Task Force, which will focus on developing a clearer regulatory framework for digital assets.
Peirce praised this change, noting that the policy staff, rather than enforcement personnel, will now lead public engagements to create workable crypto regulations.
US SEC’s Hester Peirce emphasized that this strategic shift does not mean the SEC will stop using enforcement actions when necessary. However, she welcomed the focus on creating transparent regulations, which she believes will better serve the public and the industry.
“This new approach drives today’s dismissal of the charges against Coinbase,” Peirce said, “but it does not signal an end to the Commission’s use of its enforcement tool in appropriate cases.”
Meme Coins Not Classified as Securities
Concurrently, the US SEC’s Division of Corporation Finance clarified its stance on meme coins, stating that transactions involving these assets do not constitute the offer and sale of securities. Meme coins, inspired by internet memes and trends, are typically bought for entertainment or cultural purposes, with their value driven by market speculation.
According to the Division, meme coins lack the characteristics of traditional securities since they do not generate income or confer rights to profits or assets. However, the SEC warned that fraudulent conduct related to meme coins could still face enforcement actions under other federal and state laws, according to a bill released yesterday.
Moreover, the dismissal of the Coinbase lawsuit is part of a series of recent resolutions in high-profile SEC crypto cases. The SEC also dropped enforcement actions against Opensea and Gemini, while closing its investigation into Robinhood Crypto without pursuing further action. Additionally, legal experts are speculating that the ongoing case against Ripple may soon be resolved, with both parties potentially agreeing to drop their appeals.
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