The United States Securities and Exchange Commission (SEC) is determined to dismantle the digital assets sector, according to a recent filing by cryptocurrency exchange Coinbase. The filing, submitted to the U.S. Court of Appeals on May 31, asserts that the SEC is committed to its regulation-by-enforcement strategy, aiming to "choke" the crypto industry.

Coinbase's statement emphasizes the SEC's perceived hostility towards digital assets, claiming that the agency has shown no willingness to collaborate on creating clear and fair guidelines for the industry. "The SEC is serious about the destruction of digital assets," Coinbase declared in its filing. The exchange argues that further attempts to seek clarification or cooperation from the SEC would be "pointless and exquisitely undeserved."

Regulatory Challenges and Legal Battle

Coinbase contends that the SEC believes its current rules are "workable enough" because it has already taken legal action against several firms for non-compliance. The exchange also highlighted dissenting views within the SEC itself, citing other Commissioners who agree that the SEC's approach is stifling innovation and hindering the growth of new technologies.

One prominent pro-crypto voice within the SEC, Commissioner Hester Pierce, recently advocated for a cross-border sandbox program between U.S. and U.K. blockchain firms to experiment with tokenized securities. During a panel at Consensus 2024, Pierce remarked, "One of the problems that we’ve had is that people have tried to come into the SEC to get relief, but, you know, you sort of come in, and nothing happens. This would [...] force the SEC’s hand a little bit."

SEC's Stance and Industry Impact

Coinbase noted that the SEC has attempted to downplay its stringent regulatory stance by suggesting that compliance difficulties affect only a "small set of market participants" under specific provisions of existing rules. However, Coinbase's filing argues that this minimization does not reflect the broader impact on the industry.

The ongoing legal battle between Coinbase and the SEC began in June 2023, when the SEC sued Coinbase for failing to register as a broker, national securities exchange, or clearing agency. Despite efforts by Coinbase to have the case dismissed, the SEC has steadfastly opposed these attempts. In January, Bloomberg senior litigation analyst Elliott Stein predicted a 70% chance of Coinbase securing a full dismissal of the lawsuit, though this optimism has yet to materialize.

As the case progresses, the outcome could have significant implications for the future regulatory landscape of the cryptocurrency industry in the United States.