In the volatile landscape of cryptocurrencies, regulatory scrutiny has been a constant factor shaping the interaction of cryptocurrencies with the global economy. The recent stance of US regulators, particularly the Securities and Exchange Commission (SEC), has triggered different reactions from crypto firms, creating a compelling dynamic in the crypto world.
US regulators, including the SEC, have instigated civil cases against leading cryptocurrency firms such as Binance, Coinbase, and Ripple. Yet, it appears not every firm has received the same treatment. Gary Gensler, the chair of the SEC since 2021, has been criticized for a “regulation by enforcement” approach towards crypto offerings. This position has escalated several cases into federal courtrooms to determine what qualifies as a security in the United States, and the judges’ verdicts have not been uniformly in favor of the regulator.
The SEC brought a lawsuit against Ripple in December 2020, alleging XRP as an unregistered offering. However, the legal battle resulted in a partial summary judgment in July that XRP was mostly not a security. Parallelly, Coinbase anticipated a legal action prior to the SEC’s lawsuit filed in June, argued that the exchange attempted to register without achieving any success or receiving appropriate feedback.
Meanwhile, Prometheum, a relatively new crypto firm, testified before the House Financial Services Committee on digital asset regulation in June, has successfully registered with the SEC. The firm secured the approval from the Financial Industry Regulatory Authority as a special purpose broker-dealer (SPBD) for digital asset securities in May. Co-CEO Aaron Kaplan asserts that “Prometheum was purpose-built to comply with federal securities laws and create the first digital asset security trading platform subject to those laws including investor protection rules.”
Ironically, Kaplan deems certain firms like Coinbase, Binance, and Ripple launched services in the U.S intending to alter existing regulations. The counter-argument, Kaplan suggests, is that the present frameworks are ill-equipped to handle digital assets.
Yet, Prometheum’s regulatory compliance and subsequent approval led to investigations by advocacy groups including the Blockchain Association and pro-crypto congress members. They voiced concerns over a potential ‘sweetheart deal’, wherein Prometheum allegedly leverages its personal connections with the SEC, thus gaining undue market advantage.
While regulations and their implications shape the crypto markets, the deciding factor will lie in the symbiotic relationship between cryptocurrency firms and regulations. Neither can exist in a vacuum, and while the push and pull between them continues, the aspiration for a harmonious coexistence seems a distant, yet hopeful future.