Coinbase is urging U.S. regulators to lift existing restrictions that prohibit Securities and Exchange Commission (SEC) employees from buying, selling, or using cryptocurrencies not classified as securities. In a formal request dated April 22, Coinbase’s Chief Legal Officer, Paul Grewal, argued that the current policy hinders regulators’ ability to effectively oversee the rapidly evolving crypto industry.
Coinbase Pushes for a Modernized Approach to Crypto Oversight
Grewal addressed two key letters one to SEC Chair Paul Atkins and another to the U.S. Office of Government Ethics calling for the rescinding and updating of Legal Advisory 22-04, which currently bans SEC staff from engaging with most crypto assets.
According to Grewal, this restriction is outdated and detrimental, particularly as the U.S. government accelerates its focus on digital financial leadership under President Trump’s executive order. The executive order requires federal agencies to submit proposals for advancing America’s digital asset dominance within 180 days and nearly half that time has already passed.
Grewal emphasized that the SEC’s Crypto Task Force and other regulatory teams cannot effectively regulate the industry without firsthand experience using the underlying technology.
Proposed Solutions to Avoid Conflicts of Interest
Coinbase isn’t calling for unrestricted crypto trading by SEC staff. Instead, Grewal proposes practical solutions:
- Issue waivers for Crypto Task Force members and relevant SEC staff directly involved in crypto regulation.
- Permit crypto holdings under conditions that prevent direct conflicts of interest similar to existing policies for traditional asset holdings.
- Clarify distinctions between cryptocurrency assets that could impact a regulator’s impartiality versus those that wouldn’t, based on predictability of valuation effects.
Grewal cited that in other financial regulatory fields, staff participation is allowed under controlled circumstances without undermining their regulatory integrity. He argues that a blanket ban is unnecessary and counterproductive.
Aligning With the Office of Inspector General’s Perspective
Grewal pointed out that this policy change would align with the stance previously expressed by the Office of the Inspector General, which advocates for continuous monitoring of the evolving market landscape and the adaptive development of regulatory expertise, rules, and tools.
By enabling SEC staff to engage responsibly with cryptocurrencies, Coinbase believes that regulatory clarity, consumer protection, and innovation will all benefit.
Final Thoughts
As regulatory scrutiny of the crypto sector intensifies, Coinbase’s call for change highlights an important issue: effective oversight requires practical understanding of the technologies involved. Allowing SEC employees to responsibly hold and interact with crypto could strengthen their regulatory capabilities without compromising integrity a step Coinbase argues is essential for advancing America’s leadership in digital assets.
It remains to be seen whether the SEC and Office of Government Ethics will seriously consider Coinbase’s proposals, but the debate underscores how evolving technology demands a modernization of regulatory practices.
