SEC – Multiple executives from crypto companies have expressed their frustration with the US government following the latest developments in the crypto space.
Many have blasted them for a lack of clarity with the industry’s rules.
However, a primary focus of the crypto community’s rage lies in the Securities and Exchange Commission due to its aggressive actions against crypto firms.
US & crypto
While other countries have become more accepting of cryptocurrency, the United States is a few steps behind.
The country has yet to develop a comprehensive set of regulations allowing cryptocurrency and blockchains firms to operate without the fear of regulators targeting them.
Since the collapse of crypto exchange FTX in 2022, the US SEC took the initiative to ramp up enforcement actions against companies.
On Wednesday, the SEC sent Coinbase, one of the top crypto exchanges in the space, a Wells notice.
It warned the company that it found potential violations of US securities law.
Additionally, the SEC unveiled fraud and unregistered securities charges against crypto entrepreneur Justin Sun and celebrities who endorsed digital coins he was endorsing.
Currently, the SEC is in a legal clash with several other crypto companies, including Gemini, Genesis, and Ripple.
“It feels uncollaborative,” said an anonymous crypto executive over the Paris Blockchain Week event.
“It’s very frustrating for players that have been doing right the whole time.”
Meanwhile, ConsenSys CEO and Ethereum co-founder Joe Lubin said he thought the ecosystem was frustrated.
“I think we’re sort of continuing to watch the SEC play this game of punishing the people that are still surviving,” said Blockchain.com president Nicolas Cary.
“And it’s a little bit, you know, sort of frustrating thing to observe.”
Most of SEC’s actions involve the application of current regulations to the crypto industry decades after the Howey Test.
The Howey Test is a key test to determine if something is a security or not.
However, many in the crypto industry feel it isn’t the right way to go.
“Where I think you have less successful regulatory regimes is when you try to analyze crypto through the lens of traditional finance,” said Oliver Linch, the CEO of Bittrex Global.
“You say, ‘Well, is it a bit like a security? Is it a commodity?’ No, it’s kind of none of those things. It’s crypto.”
Clarity & sympathy
The Paris Blockchain Week is one of the most prominent crypto events in Europe, where the actions of the SEC was one of the hottest topics among attendees.
Several executives requested the US regulators for clarity.
“We’d love to have a little more clarity in regulation,” said Silvio Micali, the founder of blockchain company Algorand.
However, others were more sympathetic with SEC.
They suggested that the watchdog is operating along the existing rules, and that the US government has the power to change them.
“What are they supposed to do? If all you’re given is a hammer, the whole world looks like a nail,” said Linch.
Meanwhile, Cary noted that the SEC is only doing their job to protect consumers.
This month, SEC Chair Gary Gensler talked about the points in an opinion piece on The Hill, suggesting the regulator was clear on the rules.
“I find the talking point that there’s a lack of clarity in the securities laws unpersuasive,” he said.
“Some crypto companies might message that the laws are unclearer rather than admitting that their platforms don’t have sufficient investor protection.”
Gensler also cited examples of crypto firms falling under existing securities laws, including instances when companies offer lending products.
Additionally, he said crypto intermediaries aren’t lining up to register with the SEC and comply with the Congress’s laws.
Furthermore, the SEC chair said enforcement actions are another tool from the regulator’s toolbox to weed out noncompliance.
Executives warned that the lack of proper regulation in the United States could lead to the country falling behind others and jurisdictions.
“It’s incumbent, I think, on Congress to actually create a legal regulatory framework that regulates crypto properly, because… crypto is here to stay,” said Linch.
Governments worldwide are weighing up on how they could regulate cryptocurrency.
Dubai and Switzerland have endorsed themselves as crypto-friendly destinations with advantageous regulation.
Meanwhile, the European Union is slated to introduce the Markets in Crypto-Assets or MiCA regulation in 2023.
It is designed to bring rules in and around digital currency companies.
Monica Long, the president of Ripple, believes the US could fall behind other jurisdictions in the crypto economy.
“Europe is really emerging as a leader in terms of setting really clear regulations and rules that allow crypto companies and also traditional finance to embrace crypto,” said Long.