“Crypto regulation” refers to the laws and rules created by government bodies and financial regulatory agencies to oversee and manage the use of cryptocurrencies and related activities such as cryptocurrency trading, mining, and investing.
The Securities and Exchange Commission (SEC) is a key regulatory agency in the United States that is responsible for enforcing federal securities laws, protecting investors, and maintaining fair and orderly markets. In recent years, the SEC has become increasingly involved in regulating cryptocurrencies and initial coin offerings (ICOs) as they relate to securities laws.
Some individuals and organizations in the cryptocurrency community argue that the SEC is going too far in its regulatory efforts, imposing overly burdensome requirements on cryptocurrency issuers and stifling innovation in the space. They argue that the SEC’s approach fails to recognize the unique characteristics of cryptocurrencies and blockchain technology, and that existing securities laws are not a good fit for regulating these new financial instruments.
Others, however, believe that the SEC’s efforts are necessary to protect investors from fraud and abuse in a largely unregulated market. They argue that cryptocurrencies can be used to facilitate illegal activities such as money laundering and that some cryptocurrency issuers have taken advantage of investors by making false or misleading statements about their offerings.
The regulator doesn’t make the laws
Just like in Europe, US regulators are not responsible for making laws. As is usual in most democracies, laws are passed by politicians in parliament or congress. The job of the authorities is to monitor compliance with the law and, if necessary, to intervene when there is a potential risk of violation or has already been violated.
Under this premise, one can now come to the conclusion that the SEC and other American authorities are exceeding their competence in “crypto-fighting”. In their crackdown on the crypto industry, as we have already reported , the authorities are creating facts or crypto regulation that should actually come from Congress in the USA. Jake Chervinsky, Chief Policy Officer of the Blockchain Association, also comes to this conclusion in his Twitter posts .
13/ The SEC’s main tactic is regulation by enforcement, and it struck again last week by labeling Kraken’s staking service a security.— Jake Chervinsky (@jchervinsky) February 14, 2023
That’s frustrating, but it doesn’t change much for anyone else. Settlements aren’t the law, and every set of facts is unique. Others will fight.
SEC against crypto: “Everything is a security”
The SEC makes it easy for itself by repeating like a mantra that all cryptocurrencies should be classified as securities and that applications such as staking should also be treated as securities transactions. In doing so, it is usurping responsibilities that it has not yet been assigned and setting precedents before the relevant laws have even been passed.
It is therefore to be hoped that the other state forces will slow down the SEC’s zest for action. The current situation leaves crypto companies in a state of shock because they have to expect sanctions from the authorities at any time. A recent example of this was crypto exchange Kraken , which had to pay $30 million to the SEC and shut down its staking service. Coinbase CEO, Brian Armstrong, already feels warned and wants to fight for his staking service in court if the SEC next knocks on him .
The crypto sector is not a wild west, Gary Gensler!
SEC boss Gary Gensler is not John Wayne, who can shoot wildly – after all, we do not live in the Wild West. With the rapid advances, the SEC not only harms the crypto companies, but also deters the companies and banks that cooperate with the crypto industry, see the Silvergate and Signature Bank cases .
In addition to the companies, the victims are the consumers, who have to switch to foreign and, in case of doubt, less regulated providers. With bans, you neither create consumer protection nor build up an innovative sector – hopefully this insight will mature in the near future with Mr. Gensler.
Overall, the debate over cryptocurrency regulation is complex and ongoing, and it will likely continue as governments and regulatory agencies grapple with how best to manage the rapidly evolving world of digital assets.