What is Causing Crypto Enthusiasts to Turn Against the SEC?

It appears that the Securities and Exchange Commission (SEC) has developed a negative stance towards cryptocurrency.

The Securities and Exchange Commission (SEC) has been at the forefront of opposition to cryptocurrency, which has sparked a backlash from crypto enthusiasts. In the first quarter of 2023, the regulatory body imposed a series of restrictive policies on several crypto organizations, which only served to amplify tensions between the SEC and the crypto community.

Despite this, the SEC has faced major obstacles and received a fair amount of criticism, which has provided some relief for the crypto community. But what exactly has the SEC done to provoke such a response from crypto enthusiasts, and why have they become so displeased with the regulatory body?

SEC’s Actions Against Crypto Organizations

The Securities and Exchange Commission (SEC) has been imposing strict policies on several crypto organizations in Q1, 2023. This has led to a wave of protests from crypto enthusiasts, as the SEC appears to be launching a war against crypto. Here are some of the SEC’s actions in the first quarter of 2023:

1. Opposed Binance–Voyager Deal In February 2023, the SEC opposed Voyager Digital’s request to sell its platform to Binance, claiming that Voyager offered unregistered securities. The agency also raised concerns about the security of assets and plans for asset transfers on Binance.US. However, the federal judge criticized the SEC’s approach and timing, and approved the deal.
2. Rejection of Grayscale’s Bitcoin ETF proposal The SEC rejected Grayscale’s request for a Bitcoin ETF approval, even though the agency approved a Bitcoin Futures ETF in 2021. Grayscale filed a lawsuit against the SEC, and at the initial hearing, the presiding judge criticized the SEC’s rejection of Grayscale’s approval after previously approving a similar product.
3. Continued Stance Against Ripple The SEC’s chair Gary Gensler announced that most crypto assets are securities, revealing the agency’s bias against XRP, Ripple’s token. Meanwhile, the legal case between Ripple and the SEC continues after the judge struck out some of the SEC’s expert witnesses.
4. War Against Crypto Staking The SEC claimed that Kraken enabled the sale and purchase of unregistered securities through its crypto-staking platform, leading to the shutdown of Kraken’s on-chain staking service for U.S. investors. Gensler also warned other crypto staking platforms, eliciting a reply from Coinbase’s CEO, Brian Armstrong.
5. Gary Gensler’s Comments In a speech released on March 2, 2023, Gensler implied that crypto trading and lending platforms do not qualify as crypto custodians, indicating his bias against cryptocurrencies.

While the SEC has been taking action against crypto organizations, it has faced criticisms and major snags. The federal judge criticized the agency’s approach in the Binance-Voyager deal, and the judge in the Grayscale lawsuit questioned the SEC’s rejection of the Bitcoin ETF approval. Additionally, Ripple’s legal case against the SEC continues after the judge struck out some of the SEC’s expert witnesses.

Criticism of the SEC’s Actions in the Crypto Industry

The Securities and Exchange Commission (SEC) has come under fire from the crypto community for its actions against crypto organizations. Despite its aim to protect investors in the volatile crypto market, the agency has been accused of lacking transparency and legal backing for its decisions.

Critics argue that the SEC’s focus on enforcement, rather than creating regulatory frameworks, has contributed to the current state of uncertainty and confusion in the crypto industry. For example, the SEC hastily piled on a securities fraud case against a former Coinbase employee who pleaded guilty to insider trading.

Furthermore, the SEC’s approach seems to be at odds with other regulatory bodies, leading to a turf war for control over the rapidly expanding sector. Instead of working together to create a coordinated federal response, agencies like the SEC and the Commodity Futures Trading Commission are competing for the lead.

Despite these criticisms, crypto enthusiasts acknowledge the need for regulations in the industry. Bills like the proof-of-reserves bills have been well-received as a potential solution to some of the challenges in the space.

To create a stable and secure environment for crypto investors, the SEC needs to take meaningful preemptive actions instead of its regulation-by-enforcement approach. Regulatory clarity is crucial, and if the SEC provides this clarity, the US could become a global leader in blockchain and crypto adoption and regulation. Both the SEC and the crypto industry need to find common ground to achieve this goal.