The U.S. Securities and Exchange Commission (SEC) recently proposed a rule in 2022 concerning “best execution” within the crypto asset securities market. However, Paul Grewal, the Chief Legal Officer of Coinbase, has come ahead to voice his considerations concerning the proposed rule.
SEC’s Proposed Rule and Its Legal Obligations
The proposed rule, Regulation Best Execution (Reg Best Ex), looks to provide a regulatory framework for brokers to ensure they offer the best possible prices to their customers. This proposed rule has caused quite a stir in the digital currency market, as it’s the first time the SEC has applied such a rule to crypto asset securities.
As per SEC’s legal obligations, the commission needs to assess the potential costs and benefits of any new rule before it can be implemented. Additionally, they must present their findings to the public to receive comments and feedback. However, the SEC lacks the necessary information about how the crypto asset securities market operates, and this has caused some concern among market participants.
Information Deficiency: A Major Hindrance?
The crypto asset securities market is still in its infancy, and there are no workable rules or paths for companies that want to list crypto securities to register. In such a scenario, the SEC’s lack of knowledge about the market and its operations comes as no surprise. Paul Grewal highlights that the SEC must gather information and conduct analysis to develop a workable framework for crypto asset securities markets.
Related: Here’s Why The SEC is fighting a losing battle against Coinbase
“When the SEC is going to impose a new rule, it has a legal obligation to evaluate how that rule is going to affect the markets in its scope” – Paul Grewal
The Foundation of Good Rulemaking – Information Collection and Analysis
Paul Grewal emphasized that the SEC cannot just apply existing rules to crypto asset securities and call it a day. Instead, they need to do the same amount of work they do for all other securities markets, starting with the basic facts about how the market does or would operate. Information collection and analysis are the foundations of good rulemaking.
“To be clear, we’re glad the SEC is starting to think about how its rules apply to the subset of crypto that can be considered crypto securities. We’ve submitted several pieces of content, including a petition for rulemaking, to help them along.”
Coinbase’s Stance on SEC’s Proposed Rule
As the only U.S. public company operating a digital asset trading platform, Coinbase stands ready to help the SEC. However, they firmly believe that the SEC needs to do more than just copy and paste. Coinbase has already submitted several pieces of content, including a petition for rulemaking, to help the SEC develop a workable framework for crypto asset securities.
Paul Grewal’s concerns about the SEC’s proposed rule on best execution for crypto asset securities are well-founded. As the market continues to evolve, it’s essential that regulators stay up-to-date with the latest trends and developments to ensure a fair and transparent market for all.
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