Coinbase’s legal chief argues L2s are neutral infrastructure like AWS, not venues for trading financial securities.
Amid discussions concerning the classification of layer-2 networks, Vitalik Buterin voiced approval for Base, characterizing its operational model as appropriate. Buterin explained that Base functions as an addition to Ethereum, employing centralized components to enhance user experience while depending on Ethereum’s decentralized foundation for security. He stressed that Base does not custody user funds, eliminating any possibility of theft or withdrawal restrictions.
These comments from Buterin arose during a time of skepticism about what constitutes a layer-2. Attention has centered on sequencers, which handle transaction ordering, and whether their centralized control aligns with regulatory definitions of exchanges.
Securities and Exchange Commissioner Hester Peirce recently pondered if such networks act similarly to exchanges. Peirce indicated that if one entity manages critical parts, it could resemble an exchange. Still, she added that assets not classified as securities might fall outside strict oversight.
Coinbase chief legal officer Paul Grewal countered the exchange analogy. Grewal asserted that layer-2 networks serve as general infrastructure, comparable to cloud services like Amazon Web Services. He noted these systems process and group transactions, executing smart contracts without facilitating security trades.
Jesse Pollak, a co-founder of Base, specified that sequencers arrange transaction sequence but do not pair orders like matching engines in exchanges. Users retain the option to submit transactions through Base or directly on Ethereum, preserving decentralization. Pollak likened the sequencer to a coordinator optimizing flow in a dedicated lane.
Some forecasts now place Ethereum’s long-term price potential between $18,000 and $20,000 by 2026, though short-term risks include the possibility of a dip below $4,000, which traders view as a liquidity-driven reset.
