Katherine Ross

If the SEC is going to make the digital asset industry abide by rules that were made long before digital assets — or modern technology — existed, then they have to explain how the rules apply, Paradigm argues in an amicus brief.



The Crypto Council for Innovation, or CCI, which also submitted an amicus brief in support of Coinbase, said that even if digital asset companies were to register with the SEC, “there is no actionable guidance to delineate which assets the SEC thinks require registration.”



The briefs were filed in support of Coinbase as the exchange <a href="https://blockworks.co/news/coinbase-warns-sec-litigation">goes head-to-head</a> with the SEC.



“Until the SEC engages in the rulemaking Coinbase has requested, the digital-assets industry is stuck in limbo, simultaneously told to ‘come in and register’ yet having no effective means of doing so,” Paradigm <a href="https://policy.paradigm.xyz/assets/writing/Coinbase-Amicus-File-Marked.pdf">wrote</a>.&nbsp;



Paradigm’s concerns echo those of the <a href="https://blockworks.co/news/chamber-of-commerce-backs-coinbase-sec-fight">US Chamber of Commerce</a>, which also filed a brief in favor of Coinbase. The Chamber of Commerce said that the SEC’s actions cause Americans to “lose out on the practical benefits” of the digital asset industry.



The CCI <a href="https://cryptoforinnovation.org/wp-content/uploads/2023/05/CCI_Amicus-Brief-May-2023.pdf">said</a> that the SEC’s “failure to respond” to Coinbase is causing “tangible harm to a major American industry.”&nbsp;



“It is no surprise that the SEC’s actions have crippled a nascent industry and sown confusion among countless firms unable to conform to the SEC’s view of the law or challenge that view in court,” Paradigm’s brief continued.



By continuing with an enforcement-only approach, “good actors” in the industry have “no viable path” forward, the CCI argues.



“The closest the SEC has come to providing guidance is a 2019 statement which offered a non-exhaustive list of numerous factors with no explanation as to how those factors should be applied or weighted,” the CCI brief said.



In March, the <a href="https://blockworks.co/news/sec-serves-coinbase-in-latest-alleged-crypto-securities-violation">SEC served Coinbase</a> with a Wells notice concerning alleged securities violations. In response, the <a href="https://blockworks.co/news/coinbase-sec-rulemaking-petition">crypto exchange sued the SEC</a> asking for clarity on the regulations it’s trying to enforce on crypto.&nbsp;



Coinbase said that it had asked for regulatory clarity back in July 2022. It never heard back from the Commission, it claimed.&nbsp;



“It is unreasonable for the SEC — an agency with over 4,500 employees — to take nine months (and counting) to complete that simple task,” Coinbase said in a <a href="https://assets.ctfassets.net/c5bd0wqjc7v0/5PWsXaPsqQ61gA9wlFWKEX/d1d3a27d35687082565770589ef9a3ac/Coinbase_-_Mandamus_Petition__TO_FILE_.pdf">federal court filing</a>.



A court, on May 4, <a href="https://blockworks.co/news/court-sec-deadline-coinbase">gave the SEC</a> ten days to respond to Coinbase.



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SEC’s Enforcement by Action Is ‘Crippling’ Digital Assets: Paradigm

Sebastian Sinclair

<div id="highlights-block_62aa8aecc7572" class="highlights">
 <ul>
 <li>The US President&#8217;s executive order calls for a unified approach to crypto regulation and innovation</li>
 <li>The Crypto Council for Innovation said Wednesday the Department of Labor&#8217;s guidance, issued in May, takes a one sided-approach to the nascent asset class</li>
 </ul>
 
</div>



A crypto industry body in the US is urging the Department of Labor (DOL) to reconsider its crypto guidance for retirement plans, amid mounting pushback from concerned community members.



The Crypto Council for Innovation (CCI) said Wednesday the DOL&#8217;s guidance is inconsistent with directives from the White House and President Biden’s Executive Order for the nascent asset class.



In a <a href="https://cryptoforinnovation.org/wp-content/uploads/2022/06/Crypto-Council-for-Innovation-Department-of-Labor-Response-Letter_Final.pdf" target="_blank" rel="noreferrer noopener">letter</a> penned to the department&#8217;s Acting Assistant Secretary Ali Khawar, CCI is asking DOL to rescind its Release <a href="https://www.dol.gov/newsroom/releases/ebsa/ebsa20220310" target="_blank" rel="noreferrer noopener">No. 2022-01 guidance</a>, issued in March, that precludes 401(k) administrators from including crypto investment options in their plans.



Regulators are now weighing up whether to issue an official rule that would address the appropriateness of crypto in 401(k) plans, <a href="https://news.bloomberglaw.com/daily-labor-report/401k-crypto-investment-restrictions-eyed-by-labor-regulators" target="_blank" rel="noreferrer noopener">Bloomberg reported</a> Wednesday.



DOL&#8217;s guidance imposes a higher standard of care for crypto when compared to other financial options for 401(k)s by taking a one-sided and highly negative view, according to CCI.



The DOL is tasked with overseeing the security of the retirement, health and other workplace-related benefits of US employees.



It comes as the department stares down a legal challenge by 401(k) provider <a href="https://cms.blockworks.co/labor-dept-crypto-guidance-is-arbitrary-and-capricious-forusall-lawsuit-alleges/" target="_blank" rel="noreferrer noopener">ForUsAll</a>, which filed its lawsuit earlier this month claiming the department&#8217;s move to restrict the use of crypto in retirement plans is “arbitrary and capricious.”



A month after the DOL&#8217;s guidance was issued, Boston-based financial services provider <a href="https://cms.blockworks.co/fidelity-delves-deeper-into-crypto-by-allowing-bitcoin-in-401ks/" target="_blank" rel="noreferrer noopener">Fidelity Investments</a> moved to allow individuals to allocate a portion of their retirement savings to bitcoin through the company’s 401(k) investment lineup.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">&#8220;CCI is deeply concerned&#8230;based on a factually and legally flawed analysis,&#8221; the council said in its letter. &#8220;We also urge the Department to commence a more open, inclusive and deliberative process to develop guidance for the inclusion of crypto assets on 401(k) investment menus.&#8221;</blockquote>



President Biden’s &#8220;<a href="https://cms.blockworks.co/biden-signs-crypto-executive-order-promoting-responsible-innovation/" target="_blank" rel="noreferrer noopener">Executive Order</a> on Ensuring Responsible Development of Digital Assets&#8221; signed in March of this year, calls for a unified approach to regulating and evaluating cryptocurrencies. 



It marked the first time the executive branch signed such an order for the industry and was welcomed by investors and businesses alike, though it fell short of providing clearer regulatory guidelines many were asking for.



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



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