Following the recent lawsuit filed by the U.S. Securities and Exchange Commission (SEC) against Coinbase, SEC Chairman Gary Gensler went on record stating that the entire business model of the crypto industry is “built on non-compliance.” In an interview with CNBC, Gensler argued that the world does not need more digital currency, as popular currencies such as the U.S. dollar, euro and yen are already digital.
Garry Gensler, who took over as the SEC boss in 2021, noted that crypto exchanges consistently “commingle a number of functions” that would not be tolerated in traditional finance. This position came amid the SEC’s lawsuit against Coinbase – America’s largest crypto exchange – for allegedly not registering as an exchange, clearing house and broker, and also selling unregistered securities.
This is not the first time the SEC has taken action against the crypto industry. Just yesterday, the regulatory body charged the world’s biggest digital asset exchange, Binance, and its CEO Changpeng Zhao, with 13 civil complaints. The SEC alleges that Binance displayed “blatant disregard” for American federal securities laws by misusing and commingling customer funds.
The crackdown on the crypto industry has been escalating, particularly since the November collapse of digital asset exchange FTX. The SEC attributes FTX’s downfall to criminal mismanagement, accusing the exchange of commingling its customer funds with sister trading firm, Alameda Research, to place risky bets.
Throughout this year, the SEC has targeted other U.S. crypto exchanges, such as Kraken, Bittrex, and Coinbase, for allegedly selling unregistered securities. However, the regulatory crackdown has not gone without criticism. Several lawmakers, primarily Republicans, argue that the stricter regulations and lack of clarity surrounding SEC’s stance on the matter could potentially hinder innovation in the largest global economy.
Among the critical lawmakers is Representative Warren Davidson (R-OH), who openly disapproves of Gensler’s handling of the SEC. Representative Davidson reportedly plans to introduce legislation seeking Gensler’s removal from his position.
In conclusion, while the SEC’s crackdown on the crypto industry has its merits in consumer protection and regulatory compliance, it also raises concerns about the future of innovation in the sector. As the debate surrounding the regulation of the crypto industry continues, it remains to be seen what long-term effects the SEC’s actions will have on the market and its participants.