In a recent discussion, Coinbase Chief Legal Officer Paul Grewal strongly defended the company’s Base network against claims that it functions as a securities exchange. Grewal clarified that Base serves as a Layer-2 blockchain infrastructure and does not act as a platform for matching buyers and sellers of securities, which is a critical distinction in light of increasing scrutiny from U.S. regulators.
During an interview with Bankless, Grewal stated, “Base is just a normal blockchain. It’s not matching buyers and sellers of securities.” He explained that the transaction matching functionalities occur within applications built on the Base framework, rather than within the Base protocol itself. According to him, it is the automated market makers and order book platforms operating on Base that are responsible for these functions, thereby arguing that the SEC should not categorize Base as an exchange.
The definition of an exchange, as established by the U.S. SEC, is a system that facilitates the trading of securities by bringing together buyers and sellers. While Commissioner Hester Peirce has noted that Layer-2 sequencers might resemble matching engines, Grewal contended that the architecture of Base clearly avoids fitting within this definition. He emphasized that Base does not serve as a central intermediary for securities transactions; instead, it is designed as foundational blockchain infrastructure, facilitating innovative applications in the Decentralized Finance (DeFi) space.
Grewal cautioned against mischaracterizing Base, arguing that regulating it as an exchange could lead to increased operational costs and diminished efficiency, which could stifle development. He urged the SEC and other regulators to take into account the technical nuances of blockchain operations before applying regulatory standards.
In addition to addressing regulatory concerns, Coinbase is reportedly exploring the possibility of launching a Base network token, marking a notable shift from its previous stance. Jesse Pollak, the lead at Base, indicated this exploration supports both decentralization and developer engagement. However, no definitive decisions have been made regarding the token’s design, governance, or timeline. Grewal reiterated that the potential introduction of a token would not alter Base’s classification concerning regulations.
During the recent BaseCamp 2025 event, Coinbase also announced the launch of an open-source bridge with Solana, which facilitates token interoperability between ERC-20 and SPL standards. This development underscores Coinbase’s commitment to enhancing Base’s capabilities and reach within the DeFi landscape.
Base has been gaining traction as a significant player in the Layer-2 space, boasting a total value locked (TVL) of approximately $4.83 billion and supporting over 700 protocols. Grewal pointed to this growth as evidence of Base’s utility and independence, highlighting an impressive daily trading volume that approaches $2 billion, with additional volumes generated by perpetuals.
Key protocols operating on Base include Aerodrome, Spark, Uniswap, and Aave, with some relying on incentives while others demonstrate genuine growth and adoption. Grewal underscored that the efficiency and trading volume on Base reflect not only a robust network but also a healthy evolution of the Layer-2 ecosystem. As the regulatory landscape continues to evolve, Coinbase remains poised to advocate for a balanced approach that recognizes the unique characteristics of its blockchain infrastructure.
