The legal battle between the US Securities and Exchange Commission (SEC) and Coinbase, the largest cryptocurrency exchange in the US, has taken a step forward. Paul Grewal, chief legal officer of Coinbase, announced on May 4 that the Third Circuit has responded to the complaint against the SEC regarding the need for more clear rules for trading digital crypto assets. The court issued a text-only order, instructing the SEC to respond to Coinbase's writ of mandamus within ten days. Furthermore, Coinbase has been granted the right to file a reply to the SEC response within seven days of the filing.

Coinbase filed a lawsuit in April, demanding the court to compel the SEC to publicly announce its view on a petition that contains 50 specific questions about the regulatory treatment of some digital assets. The questions focus on numerous topics such as how tokens are classified as securities. Nonetheless, the SEC has not answered Coinbase’s petition. Nevertheless, the regulatory body has taken actions by initiating enforcement actions and issuing warnings to crypto exchanges.

The lack of clear regulations has caused Citi, a US investment bank, to downgrade the shares of Coinbase from buy to neutral. The bank has also lowered its price target citing too many unknowns. According to Citi analyst Peter Christiansen, the downgrade will be “Until the regulatory ‘rules of the road’ are better established in the US.”

It remains to be seen how the SEC will respond to Coinbase's writ of mandamus in ten days. Regardless, the lawsuit will have wide-ranging implications for the regulation of the digital asset industry. The demand for clarity by Coinbase and other players in the field may result in the SEC lobbying for legislative changes that can protect investors and distinguish digital assets from securities.



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