By Joe Light

Coinbase Global and the Securities and Exchange Commission moved to dismiss the agency's case against the crypto exchange, following through on Coinbase's announcement last week that the case would be dropped.

Given that the step on Thursday was expected, investors shouldn't expect it to move the stock much. But it still clears the deck for a potential battle between lawmakers and even some crypto firms about how the industry should be regulated going forward.

"For the last several years, the Commission's views on crypto have been largely expressed through enforcement actions without engaging the general public," said acting SEC Chairman Mark T. Uyeda in a statement. "It's time for the Commission to rectify its approach and develop crypto policy in a more transparent manner."

In after-hours trading, Coinbase stock rose about 0.9% to $210.22. Shares fell 2.2% during regular trading.

Since taking charge of the SEC, Uyeda and fellow Republican SEC Commissioner Hester Peirce have vowed to change the agency's approach to crypto. They have rapidly ended investigations into crypto firms and dropped enforcement actions, even in cases when judges had given rulings in favor of the agency. The SEC has launched a "crypto task force" to try to develop rules around crypto and clarify what aspects of token trading fall under the SEC's remit.

At the same time, the White House has its own policy task force, led by venture capitalist David Sacks, seeking to develop a regulatory framework. In Congress, the Senate Banking Committee next month plans to vote on a bill that would establish rules around stablecoins, a kind of cryptocurrency that is typically pegged to the dollar and backed by reserves such as U.S. Treasuries.

The next major battle for crypto in Washington, however, might be around legislation to set rules for exchanges like Coinbase and to set in stone when tokens should be treated as securities or as commodities. The SEC regulates securities, while the Commodity Futures Trading Commission handles commodities.

A key question for legislation, which could come later this year, will be how Congress decides to define what constitutes decentralization in the context of the crypto world, and what tokens and blockchains meet that bar, giving them a much lighter regulatory framework to abide by.

The definition of what counts as decentralized is important for token issuers because centralized firms are more likely to be subject to SEC oversight. Exchanges like Coinbase also care, since listing securities on their platform could also trigger the SEC's rules, especially if a future administration wants to be more aggressive on crypto enforcement.

On that legislative issue, there is even some disagreement between crypto firms, some of which believe their peers aren't as decentralized.

For now though, Coinbase, other exchanges and token projects can breathe a sigh of relief that they are unlikely to be sued by the SEC while the Trump administration and lawmakers hash that out.

Write to Joe Light at joe.light@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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February 27, 2025 17:34 ET (22:34 GMT)

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