Regulation
In its de facto war on cryptocurrencies, regulatory regulation is not the SEC’s priority
Gary Gensler once described the role of the Securities and Exchange Commission (SEC) in policing the “Wild West” cryptocurrency industry as a “cop on the beat.”
While anecdotal, what has followed since then is a series of high-profile civil lawsuits against some of the industry’s largest players. However, a statement like this would only ring true if the SEC actually adhered to its own rules-based standard.
It’s no secret that the SEC, which aims to bring cryptocurrencies under stricter control by the government as its main overseer, continues to drag its feet by refusing to adapt the rules to clarify oversight of the multi-billion dollar cryptocurrency industry. But it’s not just that the SEC refused to write new regulations on how digital assets should be treated, the agency has instead focused its attention, sadly, only on law enforcement actions that have turned courts into “execution chambers,” as academic JW Verret has observed.
Gensler, who serves as chairman of the SEC, has said this most previously digital resources they are “cryptocurrency stocks” despite there being no cryptocurrency-specific regulations that state this. Meanwhile, the SEC requires crypto companies to comply with the requirements of the still-evolving securities law.
Challenges faced by crypto companies
In fact, the SEC has never issued a single regulatory guidance related to the registration of digital assets. In the barren land of cryptocurrency regulatory ambiguity, crypto companies love it BlockFi being reported for failure to register despite not knowing how to “get in order” in the first instance.
Notably, Gensler stated this publicly Bitcoin (BTC) It’s not a sure thing, but he let it be known Ethereum (ETH)
could be a security and has repeatedly argued that hundreds of smaller tokens should fall under the jurisdiction of the SEC, which would mean that companies issuing such cryptocurrencies would have to register with US government authorities.
Define cryptocurrencies as securities
In addition to refusing to conduct the rulemaking necessary to establish stable regulatory standards on cryptocurrencies, the SEC is unwilling to formally define what makes a cryptocurrency a security outside of explanations provided by the agency in its enforcement actions.
Granted, the SEC has said it is in the process of crafting compelling crypto policies, highlighting proposals such as those that seek to revise the definition of exchanges to require that investment advisors use qualified custodians to park their clients’ cryptocurrency. However, if the SEC spent as much time clarifying cryptocurrency-specific rules (as many in the industry have urged it to do) as it does taking crypto companies to court, we might have more answers.
But regulating cryptocurrency regulation is not the SEC’s priority, nor is providing clear answers that could alleviate the legal quagmire that many crypto companies stay inside.
Balance application and driving
Gensler’s view is that existing securities laws are clear enough that the SEC’s measures already apply to cryptocurrencies—a convenient but misleading argument that denies the need for new rules. What’s more, Gensler (who also once taught at MIT
blockchain conference course and has historically reversed his views) said that while misconduct is rampant in the cryptocurrency industry, cryptocurrencies represent only a small portion of the U.S. capital markets.
If indeed the cryptocurrency sector is too small to exist on the SEC’s direct radar, why has this seemingly inconsequential sector garnered so much attention from the agency, leading to controversial billion-dollar fines for crypto companies like Ripple? How does pursuing a punitive campaign against cryptocurrencies help provide clear guidance on key issues impacting the industry?
Global trends in cryptocurrency regulation
Hundreds of millions of people around the world use cryptocurrencies for various purposes and believe in their potential. The SEC’s failure to see how cryptocurrencies are inevitably part of our future means that at the federal regulatory level, the United States could fall behind the rest of the world. The EU, the United Kingdom, United Arab Emirates, Japan, Singapore and even China have introduced or are in the process of introducing permanent regulatory frameworks for cryptocurrencies – take note SEC. US policymakers should consider managing a sandpit also, just like the UK did.
I often find myself thinking about the age-old dating question: “Where do we go from here?” No, but really. How can the cryptocurrency industry continue to move forward without a clear regulatory path forward? The stakes are too high, especially as cryptocurrencies are increasingly intertwined in the global financial system. “Protecting investors and strengthening public confidence in our markets requires that we work with a sense of urgency,” Gurbir Grewal, director of the SEC’s enforcement division, once observed. I only wish this sense of urgency was applied to the formation of much-needed guidelines on cryptocurrency regulation.
Gary Gensler once described the role of the Securities and Exchange Commission (SEC) in policing the “Wild West” cryptocurrency industry as a “cop on the beat.”
While anecdotal, what has followed since then is a series of high-profile civil lawsuits against some of the industry’s largest players. However, a statement like this would only ring true if the SEC actually adhered to its own rules-based standard.
It’s no secret that the SEC, which aims to bring cryptocurrencies under stricter control by the government as its main overseer, continues to drag its feet by refusing to adapt the rules to clarify oversight of the multi-billion dollar cryptocurrency industry. But it’s not just that the SEC refused to write new regulations on how digital assets should be treated, the agency has instead focused its attention, sadly, only on law enforcement actions that have turned courts into “execution chambers,” as academic JW Verret has observed.
Gensler, who serves as chairman of the SEC, has said this most previously digital resources they are “cryptocurrency stocks” despite there being no cryptocurrency-specific regulations that state this. Meanwhile, the SEC requires crypto companies to comply with the requirements of the still-evolving securities law.
Challenges faced by crypto companies
In fact, the SEC has never issued a single regulatory guidance related to the registration of digital assets. In the barren land of cryptocurrency regulatory ambiguity, crypto companies love it BlockFi being reported for failure to register despite not knowing how to “get in order” in the first instance.
Notably, Gensler stated this publicly Bitcoin (BTC) It’s not a sure thing, but he let it be known Ethereum (ETH)
could be a security and has repeatedly argued that hundreds of smaller tokens should fall under the jurisdiction of the SEC, which would mean that companies issuing such cryptocurrencies would have to register with US government authorities.
Define cryptocurrencies as securities
In addition to refusing to conduct the rulemaking necessary to establish stable regulatory standards on cryptocurrencies, the SEC is unwilling to formally define what makes a cryptocurrency a security outside of explanations provided by the agency in its enforcement actions.
Granted, the SEC has said it is in the process of crafting compelling crypto policies, highlighting proposals such as those that seek to revise the definition of exchanges to require that investment advisors use qualified custodians to park their clients’ cryptocurrency. However, if the SEC spent as much time clarifying cryptocurrency-specific rules (as many in the industry have urged it to do) as it does taking crypto companies to court, we might have more answers.
But regulating cryptocurrency regulation is not the SEC’s priority, nor is providing clear answers that could alleviate the legal quagmire that many crypto companies stay inside.
Balance application and driving
Gensler’s view is that existing securities laws are clear enough that the SEC’s measures already apply to cryptocurrencies—a convenient but misleading argument that denies the need for new rules. What’s more, Gensler (who also once taught at MIT
blockchain conference course and has historically reversed his views) said that while misconduct is rampant in the cryptocurrency industry, cryptocurrencies represent only a small portion of the U.S. capital markets.
If indeed the cryptocurrency sector is too small to exist on the SEC’s direct radar, why has this seemingly inconsequential sector garnered so much attention from the agency, leading to controversial billion-dollar fines for crypto companies like Ripple? How does pursuing a punitive campaign against cryptocurrencies help provide clear guidance on key issues impacting the industry?
Global trends in cryptocurrency regulation
Hundreds of millions of people around the world use cryptocurrencies for various purposes and believe in their potential. The SEC’s failure to see how cryptocurrencies are inevitably part of our future means that at the federal regulatory level, the United States could fall behind the rest of the world. The EU, the United Kingdom, United Arab Emirates, Japan, Singapore and even China have introduced or are in the process of introducing permanent regulatory frameworks for cryptocurrencies – take note SEC. US policymakers should consider starting a sandpit also, just like the UK did.
I often find myself thinking about the age-old dating question: “Where do we go from here?” No, but really. How can the cryptocurrency industry continue to move forward without a clear regulatory path forward? The stakes are too high, especially as cryptocurrencies are increasingly intertwined in the global financial system. “Protecting investors and strengthening public confidence in our markets requires that we work with a sense of urgency,” Gurbir Grewal, director of the SEC’s enforcement division, once observed. I only wish this sense of urgency was applied to the formation of much-needed guidelines on cryptocurrency regulation.