The Policy Pulse: 29 April 2023

Coinbase has had enough of being ignored by the SEC!

This week Coinbase’s Chief Legal Officer announced that the crypto exchange filed an action in federal court to compel the SEC to respond to its July 2022 petition.

It seems that Coinbase had requested the SEC to provide clarity using its formal rulemaking process. The SEC has not responded to Coinbase’s request, and the company believes the agency has already made up its mind to deny the petition.

Coinbase noted that regulatory clarity is crucial for the crypto industry, and Coinbase will continue to take every step available to seek it. It also said that the government’s disjointed regulation-by-enforcement approach could negatively impact American competitiveness and national security.

Read the full story about Coinbase’s action against the SEC.

See Also

Weekly Crypto Policy News Roundup, 11 March 2022

Later in the week Coinbase also dropped a video issuing their response to the SEC’s Wells notice.

Bahamas Regulator Takes Steps to Avoid Another FTX

• Also this week, the Securities Commission of the Bahamas announced that it would be proposing new regulations to govern digital asset firms following the collapse of FTX.
• The proposed rules are included in the Digital Assets and Registered Exchanges (DARE) Bill and include expanding the definition of digital assets businesses, disclosure requirements for crypto staking activities, and tighter requirements for stablecoin issuers.
• The DARE Bill also includes a specific clause that requires digital asset exchanges to ensure their systems and controls are adequate and appropriate for the scale and nature of their business. It also bans the issuance of algorithmic stablecoins following last May’s implosion of TerraUSD.
• The consultation on the proposed rules runs until May 31, and the authorities hope the bill will become law by the end of Q2 2023.
• The new regulations aim to strengthen protection mechanisms, enhance ongoing supervision for digital asset businesses, and provide flexibility for the commission to prescribe additional rules applicable to digital asset exchanges and bespoke requirements for different categories of registrants.
• Essentially, the Bahamas wants to avoid bringing another FTX or Terra to its shores in the future.

FDIC Weighs in on Signature Bank Collapse

• According to Federal Deposit Insurance Corp (FDIC) Signature Bank collapsed due to mismanagement by its officers and contagion effects after the collapse of Silicon Valley Bank and the wind-down of Silvergate Bank.
• Federal Deposit Insurance Corp. (FDIC) stated that Signature Bank relied heavily on uninsured deposits, lacked strong liquidity risk-management practices, and had poor risk management in general.
• Signature Bank’s association with and reliance on the crypto industry deposits was also cited as a major risk.
• The FDIC’s report was published on the same day that the Federal Reserve and Government Accountability Office published the results from their own reviews of Silicon Valley Bank and Signature.
• Silicon Valley Bank’s collapse was attributed to serial mismanagement made worse by unaccounted-for risks, and Signature Bank had reduced its exposure to deposits from the crypto industry over the 12 months prior to its collapse.
• All three reports also noted that there was a lack of action from federal regulators and this contributed to the collapse.

European Central Bank Issue Progress Report on Digital Euro Progress

• The ECB released its third report on the design of the digital euro, focusing on access and distribution options.
• According to the report, Euro area residents, merchants, and governments would be onboarded first, followed by consumers in the EEA and selected third countries.
• In-store sales could be done through a QR code or touchless technology, with online and offline functionalities also available.
• Conditional payments would be possible, but programmable money would not be considered.
• A focus group survey found budget management tools and peer-to-peer payments were well received, but privacy issues were raised.
• ECB executive board member Fabio Panetta stated that the digital euro should be a public good and that merchants should be obliged to accept it as legal tender.
• The Eurosystem is still studying digital euro distribution, and the European Commission plans to propose a regulation in Q2 2023.

Read the report in full here.

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