An intriguing situation has arisen, as it appears that several U.S. based crypto exchanges may have listed numerous tokens deemed by the Securities and Exchange Commission (SEC) to be unregistered securities. Crux of this issue lies in the tokens being circulated without proper registration, considered as infractions of US investor-protection laws.
Sourced from a recent Wall Street Journal report, 76 digital tokens, including XRP, considered the best-known and most valuable token among them, have been identified by the SEC and U.S. courts. Interestingly, the SEC does not view these tokens as commodities under the existing regulatory framework in the country.
The report brings up another red flag, as out of the 76 security tokens, almost half (37) have been involved in suspected fraudulent activities. The development has led to the delisting of several tokens, including XRP, from major US-registered crypto exchanges like Coinbase and Kraken.
Despite the consensus among various US regulatory agencies on taking a tougher stance on cryptocurrencies, the SEC’s classification of these tokens could be an effort to expand its influence and oversight on the crypto industry. Following current rules, the SEC’s authority extends only to the regulation of securities. Assets that fall under the “commodity” category, such as Bitcoin, are regulated by the Commodity Futures Trading Commission (CFTC).
The ongoing crackdown of the crypto industry in the U.S. has earned the nickname “Operation Choke Point 2.0.” The recent developments that fall under this crackdown include the controversial Wells Notice served to Coinbase by the SEC and a lawsuit against Binance and its CEO Changpeng Zhao filed by the CFTC.
As the situation unfolds, there is a lingering unease amidst stakeholders. While there seems to be a need for strict regulations and crackdown to eliminate potential fraudulent activities in the growing crypto market, it is crucial to strike a delicate balance. Excessive regulations and restrictions may result in stifling innovation and development that the crypto ecosystem has to offer. It remains to be seen how regulators will address this delicate and complex issue while creating a conducive environment for continued growth in the space.