Coinbase has raised significant concerns regarding the US Securities and Exchange Commission’s (SEC) proposed rule for decentralized exchanges (DEXs). The main issues highlighted by Coinbase pertain to the compliance costs and their potential impact on smaller DEXs.

Key Points

Cost-Benefit Analysis Flaws:

Insufficient Economic Assessment: Coinbase asserts that the SEC’s analysis does not adequately assess the rule’s economic impacts, particularly concerning efficiency, competition, and capital formation.

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Lack of Understanding of DEX Operations:

Incomplete Information: The SEC’s proposed benefits are based on an incomplete understanding of DEX operations and their specific compliance costs, leading to speculative benefits.

Withdrawal and Reevaluation Call:

Recommendation by Paul Grewal: Coinbase’s chief legal officer, Paul Grewal, recommends that the SEC withdraw the current proposal and conduct comprehensive research to gather critical information.

Arbitrary Regulatory Approach:

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Inconsistency in Application: The SEC’s approach is described as arbitrary, applying traditional regulatory rules to DEXs without considering their unique operations, leading to potentially prohibitive compliance costs.

Digital Asset Classification Ambiguity:

Lack of Clear Guidelines: The SEC’s unclear classification of digital assets as securities results in inconsistent regulatory practices, relying on case-by-case litigation rather than providing clear guidelines.

Impact on Smaller DEXs:

Competitive Disadvantage: The proposed rule may disproportionately affect smaller DEXs due to high compliance costs, giving an unfair advantage to larger, established players and potentially stifling innovation.

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Coinbase’s letter emphasizes the need for a regulatory framework that considers the unique characteristics of DEXs, promoting a more informed and equitable approach that supports competition and innovation in the market.

Source: cryptopotato.com

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