Paul Grewal, chief legal officer for Coinbase, has urged to rescind prohibition of SEC employees from holding or using cryptocurrencies. He called the prohibition “particularly egregious” as the vast majority of crypto activity does not involve securities.
In a letter to the acting director of the US Office of Government Ethics (OGE), Grewal stressed that SEC staff need to use crypto and understand the technology before making recommendations for regulatory proposals.
He noted that “potential conflicts” in removing the ban can easily be managed.
“To regulate technology, you need to understand it. To understand technology, you need to use it,” he wrote.
In January, President Trump signed an executive order to “establish regulatory clarity for digital financial technology.” He had ordered a Working Group, comprising key leads, including the SEC staff, to submit a report within 180 days, recommending crypto regulatory and legislative proposals.
Coinbase’s Grewal noted that almost half of the given time is already over. Further, he emphasized the need for the SEC staff to use the technology, on which they are making recommendations.
Grewal Writes to Newly Sworn-In SEC Chair Paul Atkins
Additionally, in a separate letter to the new Securities and Exchange Commission chair, Paul Atkins, he said that the ban on SEC employees from holding crypto is an “impediment to the Task Force’s ability” to aid in the right crypto regulatory recommendations.
“This needs to be corrected immediately,” he wrote in the letter. Grewal added that Coinbase has pressed the OGE to rescind and update Legal Advisory 22-04.
The Legal Advisory, released in 2022, states, “an SEC employee who holds any amount of a cryptocurrency or stablecoin may not participate in a particular matter.”
He also said that this rule is “misguided and damaging to [crypto] regulatory progress.”
In the letter, Grewal told Atkins that the Commission should clarify that certain crypto holdings would not have “a direct and predictable effect on the value of their crypto or stablecoins.”
Most Crypto Activities are Not Securities: Coinbase CLO
Further, he added that the Commission must continuously adapt and build new expertise, given the rapid rise in crypto.
Besides, he noted that most crypto activities are not securities, highlighting the recent SEC reversals on crypto enforcement actions.
“The technology itself is not a security, and securities regulators’ engagements with the technology does not inherently entail conflicts or concerns.”
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