What happened?
Coinbase’s chief legal officer Paul Grewal publicly argued that Base is just a Layer-2 blockchain and not an exchange, pushing back against SEC suggestions that sequencers could be treated like matching engines. Key industry voices including Vitalik Buterin and Ripple’s CTO backed that view, and Coinbase highlighted technical distinctions about where trade matching actually happens. At the same time Base is exploring a native token, added a Solana bridge, and otherwise signaled a shift in its roadmap.
Who does this affect?
This matters for Coinbase and the Base team because regulatory labeling could change how they operate and what compliance is required. It also hits developers and DeFi projects on Base who would face heavier costs or design changes if the network were treated as an exchange. And it affects users and investors since any token launch, bridge activity, or rule change could change liquidity, yields, and risk exposure.
Why does this matter?
If regulators treat Layer-2 sequencing as exchange activity it could impose big compliance burdens that slow innovation and raise costs across the ecosystem. A Base token or shifting incentives could reallocate liquidity, change TVL dynamics, and compete with other Layer-2s, while subsidies and bridged capital mean outcomes could move markets quickly. Overall, how this plays out will influence where capital flows, which protocols survive without heavy incentives, and how fast DeFi adoption grows on Layer-2 networks.