Table of Contents
Opinion
Introduction
Should crypto exchanges be allowed to defraud investors? Of course not! No one in their right mind would even remotely back that statement. And many in the crypto realm are ready for a regulatory framework to protect investors. But that’s not what the US SEC is doing to crypto projects.
Every other day, it becomes clearer that the regulator has a target on crypto’s back. It’s not creating regulations; it’s just one assault after another. In fact, the million-dollar question in crypto is, ‘does the US SEC plan to kill crypto?’
Who is the US SEC?
The United States Securities and Exchange Commission (US SEC) is a US regulatory arm for investor protection. After the wall street crash of 1929, the US Congress addressed the need for a regulator to prevent similar incidents. Born in 1934, the US SEC came to curtail fraud and manipulation while preserving capital markets’ integrity.
US SEC’s main roles are;
- Investor protection from institutional fraud.
- Maintainance of fairness and order in financial markets.
- Facilitating fair capital access for small businesses.
In rigorous processes, the US SEC scrutinizes and screens financial markets to oust any wrongdoers. Because of SEC’s determination for about nine decades, financial markets are safer from fraud.
The body consists of 5 commissioners, one of them being the chair, Gary Gensler. Each commissioner serves for a 5-year term before being replaced. Their screening process involves appointment by the president and approval by the Senate. Three of the currently serving SEC commissioners are Joe Biden appointments.
US SEC’s Thirst for Crypto Blood
Despite its good role in investor protection, the ombudsman is overstepping its bounds when dealing with crypto. Most recent SEC actions targeted individual crypto coins, projects and even business protocols.
All altcoins are securities!
Crypto stakeholders secured their first grand triumph after a federal court declared any non-institutional sale of XRP as not a security sale. The victory celebrated across crypto debunked SEC’s biggest attack weapon, ‘the security tagging.’ Earlier this year, US SEC Chair Gensler claimed all cryptocurrencies except Bitcoin are securities, a statement he failed to back when asked before the Financial Services Committee.
Using Howey’s Test, US SEC classified dozens of cryptocurrencies as securities, including DASH, ALGO, XRP, BNB, BUSD, ADA, and SOL. Many of the coins attacked are best-selling high market cap assets. Attacking high-cap crypto coins sells FUD, reducing confidence levels. Consequently, thousands of US-based investors sell their holdings to avoid future losses.
SEC’s spin-off following the loss of the XRP case is intriguing. In an embarrassing twist of meanings, the US SEC statement noted that “the court agrees that Howey test governs security analysis of crypto transactions.”
Crypto exchanges marked
There seem to be no limits to SEC’s attacks towards the blockchain realm. Recent legal charges against Binance and Coinbase are cases in point.
Coinbase fell on SEC’s radar for allegedly violating the Securities Act of 1934 regarding the sale of a security. SEC noted that Coinbase operated “an unregistered national securities exchange, broker, and clearing agency.”
Binance’s offence is the alleged violation of US laws by allowing US customers to trade. Both Binance and its head Changpeng Zhao face allegations of deception, manipulative trading and operating an unregistered broker.
Another innovator in SEC’s claws is Alex Mashinsky, the ex-Celsius CEO and founder. Mr Mashinsky took a not-guilty plea for 7 criminal counts in a Manhattan US federal court.
US SEC raised charges of “failing to register the offer and sale of their crypto asset staking-as-a-service program” against Kraken. The exchange settled with a $30 million fine and a declaration to stop the staking program.
All crypto exchanges under SEC’s radar have enormous trading volumes and considerable reputations. The elimination of Binance and Coinbase leaves a big gap in US crypto markets. But, these attacks will resume until all other exchanges bow out or agree to be tied with SEC’s ropes.
Is SEC just Biden’s dirty agent?
President Joe Biden’s standpoint on crypto markets and traders is no mystery. When the debt ceiling dilemma hit the US in May, Mr Biden unwelcomed any deal protecting crypto traders. His statement grouped crypto traders with tax cheats. Since his election, Biden set crypto markets up for invasive grilling by regulators like CFTC, IRS, and SEC.
Gensler’s appointment targeted tightening crypto regulation. Mr Gensler’s reputation was that of a tough regulator, and true to those words, Gensler has never laid back on crypto regulation.
A Forbes article in Jan 2022 mentioned Biden’s desire to probe cryptos for any security-like traits. This came shortly after Gensler’s appointment. And one year later, dozens of coins are securities based on SEC.
Is there some form of abuse of power in the SEC chair’s office? Yes. An unjustified crypto raid is an abuse of power. Moreover, politicising crypto market regulation is out-and-out mismanagement.
SEC plans a dance on crypto’s grave!
You can justifiably conclude that the SEC wants to kill crypto. James K. Flain, a defence attorney, agrees. In a tweet last December, Mr Flain said, “The SEC doesn’t want to regulate crypto; it wants to kill it in the United States.”
Jake Chervisnky, the Chief policy officer of the Blockchain Association, endorses the speculation. In an episode of The Chopping Block, Chervinsky noted the SEC resolved not to try to regulate crypto but instead kill it. And it’s possible that the SEC seeks a complete annihilation of crypto in the US.
Thinking out loud!
However, crypto is too widespread to fail. So, what’s SEC’s target? Money! The crypto industry is a grand source of money. The fines for alleged irregularities and taxes garnered can partly fund Biden’s trillion-dollar infrastructure bill. SEC’s unstoppable march towards crypto projects could be a way of securing funds.