Key Takeaways:
- SEC has an alternate motive in considering cryptos “securities.”
- The House Committee on Agriculture drafted a bill to consider crypto assets commodities.
- Will the CFTC take over if Congress passes the bill?
YEREVAN (CoinChapter.com) – The US Securities and Exchange Commission (SEC) is regulating the trillion-dollar crypto market by enforcement. The pinnacle of the agency’s strategy to eradicate the sector as a whole came with recent lawsuits against the largest crypto exchanges, Binance and Coinbase.
“Cryptos are securities” mantra is essential to SEC’s success
The crypto witchhunt did not start with the Binance lawsuit on June 5. Gary Gensler has served as the SEC Chair since 2021. Since then, the official started suing crypto firms and exchanges such as Ripple, Tron, Gemini, Genesys, etc.
“I’ve been around finance for four decades,” Gensler said in a June 6 interview. “I’ve never seen so much just noncompliance and hype masquerading as real as I’ve seen in this field.”
However, the SEC’s whole claim to govern the crypto sector relies on deeming digital assets securities, not currencies or commodities.
Hence, if not for the determination to consider altcoins securities, the SEC would not have the authority of legal action. To be clear, a currency is a store of value, unit of account, and medium of exchange, while a security is a tradable financial asset with monetary value.
Meanwhile, according to China-based reporter Colin Wu, the SEC brought 760 enforcement actions in the fiscal year 2022, a 9% increase from the previous year.
“These included 462 new or “independent” enforcement actions and ordered payments totaling $6.439 billion, the highest in SEC history and up from $3.852 billion in 2021,” commented the reporter.
The SEC might not control the crypto market much longer
Moreover, the SEC’s jurisdiction over the crypto market might end soon enough. The House Committee on Agriculture meeting on June 7, titled “The Future of Digital Assets: Providing Clarity for Digital Asset Spot Markets,” published a draft bill regarding crypto assets as commodities.
Chairman Rostin Behnam commented on SEC’s lawsuit against Coinbase, calling it the reason behind the meeting.
This action is exactly why we’re holding our hearing here today. Regulation by enforcement is not an appropriate way to govern a market, adequately protect customers, or promote innovation. And I hope that the members of our committee will put together a better framework for digital assets regulation.
said Chairman Behnam.
Moreover, after the mentioned lawsuits, the House Financial Services Committee scheduled another hearing on the draft bill to regulate crypto. Chair Patrick McHenry might again put Gensler on the spot for clearer crypto rules, as he did on April 18.
In detail, Gensler infamously failed to identify what Ether, the second-largest crypto, is. During the previous hearing, McHenry asked Gensler: Is ETH a commodity or a security? The SEC official failed to give a straight answer to the Mc Henry’s visible frustration.
Will CFTC take over?
While the SEC gradually asserted its domain in the crypto sphere, the US Commodity Futures Trading Commission (CFTC) pushed against the agency’s “regulation by enforcement.”
The case SEC v. Wahi is a striking example of “regulation by enforcement.”The SEC complaint alleges that dozens of digital assets, including those that could be described as utility tokens and/or certain tokens relating to decentralized autonomous organizations (DAOs), are securities.
said CTFC’s Commissioner Caroline D. Pham
The Commissioner also asserted that the SEC vs. CFTC dispute over crypto jurisdiction has to be put to rest. Legislators would have to get involved if the matter isn’t resolved internally, and Congress is likely to side with the CFTC.
In a 2018 document, the CFTC asserted the digital asset market needs a “multifaceted, multi-regulatory approach.” The document also cited CTFC’s 2014 ruling, which “declared virtual currencies to be a “commodity” subject.”
Since then, the CFTC has taken action against unregistered Bitcoin futures exchanges (BitFinex), and enforced the laws prohibiting wash trading and prearranged trades on a derivatives platform.
reads the document.
While it is unclear which regulator will have the upper hand, it is apparent that the crypto sphere cannot interact with the fiat economy without clear regulatory laws. However, the SEC and the CFTC will likely resolve their jurisdiction boundaries before Congress shortly.
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