The view of cryptocurrencies by the Securities and Exchange Commission (SEC) has been drawn into focus due to the stance of its Chair, Gary Gensler. Gensler has shown a clear intent to consider cryptocurrencies under the SEC’s regulatory overview, underlining the claim of widespread noncompliance with securities laws within the crypto industry. His conviction draws parallels to the pre-regulation era of the 1920s. Simultaneously, the trend of enforcement actions from the SEC aims at fostering a compliant environment and investor protection.
However, recent instances of court decisions seem to challenge the notion of a blanket crypto regulation. Citing examples, the US Court of Appeals in favour of Grayscale rebuffed the SEC’s earlier rejection of Grayscale’s application and pushed for a review reopening. The contention lies in the inconsistency of allowing Bitcoin futures-based ETFs but refuting spot Bitcoin ETFs.
In another significant decision, selling XRP on exchanges did not amount to an investment contract, declared a US court defending Ripple against an SEC lawsuit. Nonetheless, the exception noted was that XRP would become a security when sold to institutional investors, meeting the conditions set in the Howey Test.
As Congress resumed post-summer break, the probability of Gensler facing queries regarding these new court decisions impacting regulatory scenarios looms large. Moreover, the SEC’s lawsuits against crypto exchanges Coinbase and Binance for failure in exchange registration could be topics of regulatory questioning.
While this surge of scrutiny in crypto regulation in the US has led to worry among legislators for driving away crypto businesses, Senator Bill Hagerty(R-Tenn.) stated that the absence of regulatory lucidity is laying the groundwork for an unfavorable environment. Antonio Juliano, founder of the decentralized exchange dYdX, shared this sentiment stating that crypto developers may need to write off catering to customers in the US for the next decade due to the hostile regulatory environment. This standpoint reflects the dual-edged sword of regulation, where increasing oversight could stifle innovation in its attempt to protect.
Source: Cryptonews
