Coinbase’s chief legal officer, Paul Grewal, recently defended the company’s Ethereum Layer-2 network, Base, against suggestions that it should be regulated as a securities exchange. In an interview with Bankless, Grewal emphasized that Base functions as blockchain infrastructure rather than a platform for matching securities trades. He clarified that Base is just a normal blockchain, operating as a Layer-2, and does not directly engage in matching buyers and sellers of securities.
The ongoing debate surrounding Layer-2 sequencers and their classification as exchanges has caught the attention of regulatory bodies like the U.S. Securities and Exchange Commission. Commissioner Hester Peirce has expressed concerns that centralized sequencers could resemble exchange matching engines, potentially falling under SEC jurisdiction. However, Ripple CTO David Schwartz and Ethereum co-founder Vitalik Buterin have supported Grewal’s stance, likening Layer-2 networks to cloud providers that host exchange code without being classified as exchanges themselves.
Base, launched in 2023 as a developer-focused chain on Ethereum, has become a popular scaling solution for decentralized finance applications. Despite its success, Grewal cautioned against treating Layer-2 infrastructure as an exchange, warning that doing so could hinder innovation and impede ecosystem growth. At the recent BaseCamp 2025 event, Jesse Pollak, who leads the Base project, hinted at the possibility of exploring a native network token, marking a shift from Coinbase’s previous position.
In addition to potential token discussions, Base has announced an open-source bridge with Solana, enabling interoperability between ERC-20 and SPL tokens. These developments highlight the rapid growth of the Layer-2 ecosystem and the unresolved regulatory challenges faced by infrastructure providers.
While Ethereum maintains its dominance in decentralized finance with $86.3 billion in total value locked (TVL), Base is emerging as a significant player in the market. With $4.83 billion in TVL across more than 700 protocols, Base boasts substantial liquidity and trading volumes. The network’s efficiency is evident in its processing of nearly 740,000 addresses in a single day, showcasing broad retail and institutional adoption.
Protocols like Aerodrome, Uniswap, Aave, and Spark are driving Base’s ecosystem growth, with Spark witnessing a significant TVL increase. Despite its rapid rise, sustaining growth in the long term may hinge on reducing reliance on subsidies and maintaining liquidity. As Coinbase continues to navigate regulatory scrutiny and explore new avenues for decentralization, Base remains a key player in the evolving landscape of decentralized finance.