In a recent development, Coinbase, the largest cryptocurrency exchange in the United States, has launched a legal offensive against the Securities and Exchange Commission (SEC) and the Federal Deposit Insurance Corporation (FDIC).
The lawsuits, filed in a Washington, D.C. district court, seek to secure access to internal records that would shed light on what Coinbase describes as a “deliberate and concerted effort” by regulatory agencies to pressure on banks to deny crypto companies access to the federal government. banking system.
Coinbase challenges SEC and FDIC
Coinbase insists that financial regulators, including the SEC, FDIC and Federal Reserve, have long sought to hinder the digital assets industry. The exchange is seeking transparency from the federal government, demanding clarity on the regulatory landscape surrounding cryptocurrencies.
Coinbase’s lawsuit follows its previous attempts to obtain information through the Freedom of Information Act (FOIA) regarding three SEC investigations into crypto companies and entrepreneurs between 2018 and 2024, including the recently concluded investigation into the Ethereum blockchain network.
By obtaining the requested information, the exchange hopes to better understand how the SEC’s stance on digital assets has evolved over the years.
The company is also seeking details on “pause letters” sent by the FDIC to certain banks between March 2022 and May 2023, which requested a temporary halt to all activity. crypto-related activities until further guidance on the associated risks can be provided.
Following a report from the FDIC Office of Inspector General, these letters came to light, outlining the agency’s strategies for addressing cryptocurrency risks. Although it is legally entitled to the information requested under FOIA, Coinbase claims the SEC and FDIC have denied access.
This lawsuit against the SEC marks the second time this month that the agency has faced a legal action for failure to comply with FOIA requests. The American Securities Association sued the SEC on June 6 for documents related to investigations into recordkeeping practices at major Wall Street firms.
Regulatory hurdles
Coinbase alleges that the SEC and FDIC cited similar reasons for denying access to requested information, including concern that disclosure could compromise ongoing investigations and enforcement actions against other entities.
The exchange specifically refers to “Operation Chokepoint 2.0,” a term used in the crypto industry to describe what they perceive as a “coordinated effort” by financial regulators to restrict or deny cryptocurrency businesses access to banking services, similar to the original “Operation Chokepoint” initiative from 2013.
Coinbase’s lawsuits seek to uncover whether top executives at the SEC and FDIC used coordinated pressure tactics to stifle the $2 trillion digital assets industry’s access to the federal banking system.
The exchange says the lack of consistent guidance from the SEC on the application of securities laws to digital assets is detrimental to industry players.
Although Coinbase hopes the lawsuits will provide insight into enforcement actions taken by the SEC against the exchange, which is currently being sued in federal court in New York, it could face delays in obtaining the information sought after.
The Government Accountability Office recently reported a significant backlog of FOIA requests attributed to the increasing volume and complexity of information sought by individuals and businesses in recent years.
As Coinbase continues its legal battle, the crypto industry will be closely watching the outcome of these lawsuits, as they could potentially impact the regulatory landscape and contribute to greater transparency regarding crypto regulations and their enforcement.
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