The SEC’s actions against crypto companies have raised concerns in the industry, with Commissioner, Hester Peirce, criticizing the agency’s reluctance to adapt regulations to new technologies. There is also conflict within the SEC over proposed amendments to the regulatory definition of “exchange.”
Moreover, US Representative, Warren Davidson, plans to introduce legislation to remove SEC Chair, Gary Gensler, from his position. The ongoing conflict highlights the challenges of balancing innovation and regulation in the emerging crypto industry.
SEC’s previous attacks
Kraken, a cryptocurrency exchange, was penalized with a $30 million fine by the SEC in February for allegedly offering crypto staking services without proper registration, which the regulator views as an unauthorized securities offering.
Related article: Warren Buffett strikes again – calls Bitcoin a “gambling token”
During the same month, the SEC hinted at the possibility of taking legal measures against Paxos, the issuer of Binance USD stablecoin, citing the token as an unregistered security.
In March, the SEC cautioned Coinbase about potential legal repercussions for breaking securities laws with its cryptocurrency staking services. Coinbase CEO, Brian Armstrong, responded that the exchange’s staking offerings do not qualify as securities and that he anticipated defending this standpoint in court.
Peirce continues pro-crypto efforts
The SEC has initiated 30 days for public commentary on a proposed amendment to the regulatory description of “exchange,” which extends its jurisdiction to decentralized finance (DeFi) platforms. Nonetheless, Peirce, denounced the action in a recent statement, stating that it is a hindrance to the progress of emerging technologies.
According to Peirce, the proposition imposes restrictions on the range of actions that individuals in the cryptocurrency industry can undertake, thereby infringing on the First Amendment rights of the nation.
The SEC defines “communication protocol systems” as trading systems providing the use of non-firm trading interests and bringing buyers and sellers of securities together. According to SEC Chairman, Gary Gensler, a lot of crypto trading platforms are already a living definition of an exchange.
Peirce opposes the proposal as the regulator fails to provide clear examples of what “communication protocol systems” are, and the ambiguity could disrupt numerous businesses and the market. Mark Uyeda, SEC commissioner, believes that the proposal raises more questions than it addresses in terms of what is, and what is not, an exchange for purposes of the Exchange Act.
“Stagnation, centralization, expatriation, and extinction are the watchwords of this release. Rather than embracing the promise of new technology as we have done in the past, here we propose to embrace stagnation, force centralization, urge expatriation, and welcome the extinction of new technology. Accordingly, I dissent,” she explained in the statement.
The Investor Advisory Committee of the SEC proposed that the federal regulator uphold its stringent enforcement stance for cryptocurrency businesses in order to protect investors from fraudulent practices. Despite this, Peirce rebuked the SEC’s position as “paternalistic and lethargic.”
People unite to tackle anti-crypto domination
Peirce is not the only in power that is tired of Gensler’s agenda. US Representative, Warren Davidson, plans to introduce legislation that would remove Gary Gensler from his position and replace him with an Executive Director who reports to the Board.
“To correct a long series of abuses, I am introducing legislation that removes the Chairman of the Securities and Exchange Commission and replaces the role with an Executive Director that reports to the Board,” Davidson stated in a tweet.
Peirce, also known as Crypto Mom, criticized the SEC’s proposed rule amendments, stating that the regulator has been expanding its reach to solve problems that do not exist. She also claimed that the SEC has been reluctant to alter current regulations to accommodate new technologies and business models.
Critics claim that the SEC has been using enforcement actions to develop the law on a case-by-case basis instead of creating clear regulations. The SEC has launched several high-profile actions against aforementioned crypto companies as well as Ripple and LBRY over alleged violations in recent years.
The battle between cryptocurrencies and regulators continues to intensify as Peirce criticizes the agency’s efforts to expand its control over DeFi platforms. As the SEC proposes new measures that could stifle innovation and limit the activities of crypto businesses, Peirce champions pro-crypto efforts and the need to protect the rights of participants in the industry.
This ongoing conflict between regulators and the crypto world highlights the challenges of striking a balance between innovation and regulation in emerging industries. It remains to be seen how this will all play out, but it’s clear that the future of cryptocurrency will be shaped by these ongoing debates and power struggles.