Commission (CFTC) Gary Gensler testifies during a hearing before the Subcommittee on Financial Services and General Administration of the Senate Budget Committee April 28, 2010 on Capitol Hill in Washington, DC. The purpose of the hearing was to review the CFTC’s fiscal 2011 budget estimates. (Photo by Alex Wong/Getty Images)Getty Images
The Securities and Exchange Commission showed strong this week, filing lawsuits against Coinbase and Binance, the world’s largest crypto exchanges. According to several Bitcoin officials, the SEC’s allegations revolve around unregistered security breaches and could ultimately impact the United States’ role in the digital economy.
For example, Jesse Shrader, CEO and co-founder of Bitcoin startup Amboss, told me in an interview that Congress has “failed to keep up with innovations in the cryptocurrency ecosystem.”
Shrader added that SEC Chief Gary Gensler is using outdated laws through enforcement actions against the largest companies in the global crypto industry without providing clarity on their interpretation of existing laws.
Meanwhile, Congress is debating how to reduce the SEC’s power by clarifying that the Commodity Futures Trading Commission has more powers to regulate exchanges. Fortunately for bitcoin-only companies, both the CFTC and SEC have clarified that bitcoin is a commodity and not a security. Despite this, Shrader said Bitcoin companies are now trying to locate elsewhere due to the SEC’s actions this week. Strike and Fold, two bitcoin companies, announced last month that they were expanding their headquarters to El Salvador.
On the other hand, Steven Lubka, CEO of Swan Bitcoin, a bitcoin financial services company, told me in an interview that there are numerous crypto assets that Coinbase has listed “that have appeared as securities on any conventional analysis for quite some time.” He added added that the development was “not surprising”.
Lubka said the lawsuits “focused on the sale of unregistered securities and failure to separate broker-dealer and custodian functions.” Lubka added that the separation of custodians and brokers is the “gold standard in traditional finance, but a structure that few crypto exchanges operate on.”
Whatever the case, even pure-play Bitcoin companies are taking note of the SEC’s approach of primarily communicating about litigation. The SEC’s actions this week are a sign that the agency is taking a more aggressive stance on the cryptocurrency industry.
Although bitcoin companies remain largely unscathed so far, the SEC’s failure to provide opportunities for cooperation with impunity can lead to offshoring. In the long run, this will result in less regulatory oversight of this industry, diminishing the United States’ role in what many see as the future of the global economy.
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I’m a freelance writer researching the Bitcoin ecosystem. My work has been published by Bitcoin Magazine and Bitcoin News. I am personally invested in Bitcoin and fascinated by the burgeoning Bitcoin economy.
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