Coinbase Urges U.S. Regulators to Lift Ban on SEC Staff Using Non-Security Cryptocurrencies

Coinbase is calling on U.S. regulators to reconsider a policy that prevents Securities and Exchange Commission (SEC) employees from buying, selling, or using cryptocurrencies that are not classified as securities.

In formal letters sent on April 22, Coinbase’s Chief Legal Officer, Paul Grewal, addressed SEC Chair Paul Atkins and the U.S. Office of Government Ethics. Grewal argued that the current ban limits the SEC’s ability to regulate the fast-evolving cryptocurrency industry effectively.

Coinbase: Current Restrictions Hurt Effective Crypto Regulation

Grewal emphasized that the timing couldn’t be worse. President Trump recently ordered federal agencies, including the SEC, to deliver regulatory proposals to strengthen America's leadership in digital finance, with a strict 180-day deadline. Yet, according to Coinbase, almost half of that timeline has already passed, and SEC staffers are still barred from using the very technologies they're tasked with regulating.

Grewal made the case that hands-on experience is crucial. Without the ability to use crypto assets, the SEC staff are at a disadvantage when it comes to understanding blockchain technology and the nuances of the crypto market. This lack of firsthand knowledge, Coinbase warns, weakens the SEC’s ability to provide clear and effective regulation.

Coinbase Calls for Updates to Outdated Ethics Guidelines

Coinbase is asking the Office of Government Ethics to revise Legal Advisory 22-04, which prohibits SEC staff from buying, selling, or using cryptocurrencies. In a letter to Chair Atkins, Grewal proposed practical solutions, such as granting waivers to members of the SEC’s Crypto Task Force and other employees who are directly involved with digital asset oversight.

This approach, Grewal argues, would mirror how conflicts of interest are handled in similar advisory contexts. More importantly, it would enable regulators to better grasp the technology they are regulating.

A Balanced Approach to Crypto Asset Ownership

Coinbase isn't calling for a free-for-all. Instead, the company suggests a more balanced approach: allowing SEC employees to own cryptocurrencies under certain controlled conditions. Grewal points out that the majority of crypto transactions today do not involve securities, making the blanket ban unnecessarily restrictive.

Additionally, Coinbase proposed that the SEC could clarify that ownership of certain crypto assets would not create a direct and predictable influence on their value, thus addressing concerns about conflicts of interest.

Grewal also cited the Office of the Inspector General’s position that regulatory effectiveness depends on constantly updating skills, rules, and oversight tools to match the rapid pace of technological innovation.

In short, Coinbase believes lifting the current ban or at least introducing a more nuanced policy would strengthen, not weaken, the SEC’s ability to oversee the dynamic world of cryptocurrencies.