Coinbase tells SEC that DEXs can't be regulated as exchanges

Crypto exchange Coinbase, which has been embroiled in a lengthy public spat with the U.S. Securities and Exchange Commission, sent a fresh letter to the regulator on Monday, this time arguing against a proposal to regulate decentralized exchanges like their centralized counterparts.

Chief Legal Officer of Coinbase Paul Grewel said Tuesday that it would be impossible for a DEX, as the decentralized exchanges like Uniswap are called, to register in the same way as a national securities exchange. 

"This proposal is too flawed on process & substance to move forward," he wrote in a thread on Twitter. "In particular, the SEC is attempting to front run Congressional action by baking unsupported assumptions about its crypto jurisdiction into the proposed rules."

Coinbase argues SEC can't ban industry

In the 8-page letter, Grewel argued an agency’s authority to regulate a particular industry "does not include the authority to ban that industry, absent clear Congressional authorization."

"Truly decentralized systems do in fact exist and have no single organization capable of being responsible for compliance," he wrote. "The proposed rule, as applied to DEXs, would be just such an impossible requirement."

"The Commission has failed to engage in a real economic analysis and instead used the patina of an economic analysis to justify its policy preferences," Grewel continued.