Patrick McHenry of the House Financial Services Committee, a Republican from North Carolina, was sitting in front lawmakers as the five voting Securities and Exchange Commission members appeared on Capitol Hill. Pressed Head of agency about supposed regulatory confusion regarding crypto.
“The laws are clear, and it’s written by the Supreme Court,” SEC Chair Gary Gensler began to say before McHenry cut him off—turning to Gensler’s Republican-appointed colleague, SEC Commissioner Hester Peirce, to ask about the agency’s stance on crypto regulation again.
“We’ve taken a legally imprecise view to mask the lack of regulatory clarity,” Peirce answered, Gensler being just a couple of feet away. “It’s always helpful to have Congress weigh in, but there certainly are some guidelines we could provide in this area that we have chosen not to.”
This exchange, which lasted just a couple of minutes highlighted a long-standing tension between the SEC and crypto. The exchange also revealed a division within the SEC over the issue of whether the cryptocurrency industry falls under the agency’s remit and if digital asset companies are required to adhere to the decades-old securities rules.
Gensler once stated that “everything but Bitcoin” The agency has a vested interest in the industry, and this served to be a political tool for the year. Even as Donald Trump, President-elect, sought favor from the crypto sector. Wall Street’s chief cop joined the enforcement campaign of the agency, issuing tickets to crypto companies for alleged violations while also putting others on notice.
Last month, Gensler who had been appointed to the SEC by Biden, announced that his time was up. He Signs When Trump’s second term begins, on January 20, 2020, he would depart.
Trump delivers on crypto-related campaign promises promisesGensler has been replaced by Paul Atkins, a former SEC Commissioner.
“I would expect Paul Atkins to have a completely different approach,” Stephanie Avakian is a WilmerHale partner and former director of SEC Division of Enforcement. Decrypt. “He is both experienced and practical and is well-known.”
Crypto advocates may be excited about the prospect of Atkins' leadership, but it remains to be seen where the nominee could take existing lawsuits against crypto companies like Binance, Coinbase, Ripple Labs.
Anthony Tu-Sekine, a partner at Seward & Kissel, told Decrypt If the SEC abandons high-profile lawsuits quickly after pushing them forward, it could damage its reputation. Expending Resources.
“The SEC is more like a supertanker than a race boat,” Tu-Sekine said. “Don’t expect Atkins to become chairman and come out two days later and say we’re dropping all those cases. The staff has worked diligently on these cases, came to a conclusion about the law, and ultimately ended up convincing the higher-ups that a suit should be brought,” “He said”
Capitol Hill
Industry participants were cautiously hopeful when Gensler’s nomination to head the SEC for 2021 was announced. Gensler’s teaching experience at MIT of a blockchain class did not result in clearer understanding. “rules of the road,” You can also read about how to get started. Some hoped.
By stating that the existing laws could be used to regulate digital assets he became an opponent of industry. The aggressive enforcement of crypto related laws raised concerns among advocates that the approach taken by the agency is overzealous.
Gensler reflected on his time as SEC chair in November and defended the focus of the SEC on encouraging compliance with securities law in the crypto markets. After drawing comparisons to “Wild West” The sheriff’s agency has been promoting its approach to investor protection.
“This is a field in which over the years there has been significant investor harm,” Gensler The following are some of the ways to get in touch with each other. “Further, aside from speculative investing and possible use for illicit activities, the vast majority of crypto assets have yet to prove out sustainable use cases.”
The same day 18 states were represented You can find out more about this by clicking here. A lawsuit was filed against the SEC alleging the agency’s enforcer-based strategy violated law. The lawsuit was brought by Republican Attorney Generals and DeFi Education Fund. It accused the SEC of overreaching in its regulatory powers. This was a political issue that President-elect Trump had already seized upon months earlier.
“I will fire Gary Gensler on day one,” Trump made the promise at a Bitcoin Conference in July. “The day I take the oath of office, Joe Biden and Kamala Harris’ anti-crypto crusade will be over.”
Gensler’s leadership has been scrutinized It is not too late to start. The following are some examples of how to get started: You can find out more about this by clicking here. This year, there was bipartisan opposition to the idea that current laws were sufficient. As many as 71 Democrats are in the House of Representatives Vote in favor In May, the two parties introduced legislation to create a cryptocurrency market structure.
The two chambers of Congress passed another bill to repeal SAB 121SEC’s guidance requires banks to report digital assets on their balance sheets. House members were unable to override the veto of President Biden. However, 21 Democrats Showing opposition Bipartisan support also existed for Biden’s Veto.
The Crypto Industry’s Political spending that is unprecedented efforts in 2024 likely contributed to lawmakers' performance. Later, Kamalah Harris, the Democratic nominee for president, distanced herself further from SEC’s strategy. рмите на административну иуение As Election Day approached it became too late to create a framework.
Rep. Wiley Nickel, D-NC told Wiley Nickel that Vice President Harris was the Democratic nominee at the time. Decrypt The signs were there that the candidate for president would be taking a different approach “balanced approach” Crypto. Mark Cuban tried to be the successor of Gensler but his ambitions fell short.
‘Not great for entrepreneurs’
The SEC had an excellent year, despite several court setbacks. Enforcement actions generated a lot of money for the Commission. While Gensler’s political problems were being addressed, the SEC continued with its high-profile litigation.
The SEC will secure approximately $2.4 billion in fiscal year 2024. Eight and two billion dollars A total of $583 in fines were imposed across enforcement actions that affected U.S. financial markets. Terraform Labs, its founder Do Kwon, and Terraform Labs were sued for $4.5 billion of that total. The were found liable For civil fraud related to the 40 billion collapse LUNA and UST in 2022
A federal judge ruled that the lawsuit was a significant victory for SEC. Kwon, Terraform Labs and Terraform had sold LUNA to investors and Terraform Labs offered UST as a security. But the SEC was dealt a serious blow in the Southern District of New York where the complaint was filed.
Then, Find out more about XRP was created by RippleLabs and is not a cryptocurrency. “necessarily a security on its face,” A federal judge ordered Ripple pay $125 Million The SEC fined XRP transaction violators of the law. SEC later Appealed the ruling, but it had sought $2 billion in civil penalties after bringing the case in 2020—before Gensler came to lead the agency.
“Charitably, the SEC got a bloody nose,” Tu-Sekine said.
The SEC managed to retain lawsuits against Binance & Coinbase. In its complaint last year, SEC claimed both companies violated their rules. They were accused of operating unregistered as exchanges, brokers-dealers and clearing agencies. Other accusations.
A federal judge ruled in March. Find out more about The judge ruled that Coinbase’s arguments about offering unregistered investments to investors were credible, and denied most of its motion for dismissal. A federal judge in June ruled the SEC case against Binance also could be considered. ProceedCharges against Simple Earn, a product from the world’s leading cryptocurrency exchange, and for certain token sales are dismissed.
These lawsuits are also One can find out more about this by clicking here. The legal actions against Kraken crypto exchange are still ongoing. According to Blockchain Association, a group of advocacy companies, the legal costs related to crypto-related enforcement are on the rise. They estimate that the cost is at least $400,000,000, based on self-reported information from their member companies.
“While that creates a lot of work for lawyers, it is not great for entrepreneurs,” Kristin Smith is the CEO. Decrypt. “In terms of whether their projects comply with the U.S. securities laws, they have to read between the lines of various court opinions and briefs that the SEC submits.”
Some lawsuits initiated last year came back to bite the SEC, namely the Commission's case against DEBT Box, a crypto mining firm. SEC lawyers won a case in August 2023. The firm was served with a restraining and freezing order, which prevented it from arguing otherwise.
The case was dropped in May after a federal court ordered that the SEC pay DEBT Box $1.8 million to cover its legal costs. The regulator made “false and misleading statements” Robert Shelby of the Utah District court found it necessary to obtain the temporary restraining. One week later, SEC Close Citing the regional office who brought in the case “significant attrition.”
Threats to enforcement
After Gensler announced in November that he was resigning, a Texas federal judge dealt another blow to the organization. By Expanding on the Definition You can also find out more about the following: “dealer,” The SEC had planned to force decentralized financial projects into registering as brokers and securities exchanges. The court ruled that this measure was illegal and ordered the SEC not to make the changes in question.
The SEC’s enforcement threat scope has expanded in the past year. The Commission issuing Wells NotificationsThe SEC warned companies that lawsuits could come in areas which were previously left untouched (such as decentralized financing).Uniswap LabsNFTsOpenSeaThe gaming industry (The Immutable).
In addition, the Commission has issued enforcement warnings for companies, such as Robinhood. Examining The firm has now launched its own cryptocurrency after attempting to "registerGensler had earlier urged firms that deal with digital assets to seek out “its services” at the agency.
This is not how Americans want their government to operate.” Robinhood’s legal chief and former SEC commissioner Dan Gallagher later testified before Congress. “The SEC, rather than issue regulations to give regulatory certainty to a sector that craves it, has focused on individual firms such as Robinhood by regulating them through enforcement.”
Gensler’s leadership ultimately had an “immense chilling effect”” on the crypto industry, Katherine Snow, general counsel at Thesis, a venture capital firm, told Decrypt. Either forcing companies to axe projects or move overseas, she said the U.S. will have to pick up the pace to compete with regulatory progress on crypto made internationally.
However, Snow saw one noticeable drawback with Gensler’s slated departure. Over the past several years, legal minds across the industry have been united in fighting what was perceived as an existential threat.
“We all rallied together because we shared a common enemy.” Snow said. “It's going to be pretty fascinating to see what the approaches are of the various trade associations over the coming months and years, as we approach this new SEC.”
Sebastian Sinclair is the editor