After losing more than $2 trillion in less than nine months, the cryptocurrency market has more or less stabilized over the past few days. But it was also around this time that bad news came from the US Securities and Exchange Commission.
The regulator announced that nine cryptocurrencies are listed on Coinbase (Currency) – Get the Coinbase Global Inc. report Exchange, the most popular platform in the US, is unregistered securities.
This decision, which surprised the industry, has important implications because tokens or coins were until now considered non-securities. This means that they are not strictly supervised by regulators and are not subject to the same rules of financial transparency and disclosure as shares in a company, for example. The listing process is also less rigorous than that of securities.
The Securities and Exchange Commission is furious
A security is, according to the Securities and Exchange Commission, “an investment of money, in a joint venture, with a reasonable expectation of profit derived from the efforts of others.”
The announcement came as the Securities and Exchange Commission and the Department of Justice filed charges against former Coinbase product manager Ishan Wahi and two others, accusing them of running an insider trading scheme that earned them more than $1.1 million. Wahi allegedly informed his brother Nikhil Wahi and his friend Samir Ramani about the announcements of the upcoming token listing on the crypto exchange.
Prior to those announcements, which usually drive up asset prices, Nikhil Wahi and Ramani allegedly bought at least 25 crypto assets, at least nine of which were securities, and then sold them usually shortly after the announcements to make a profit. , the Securities and Exchange Commission said on July 21.
The nine tokens in question are: Flexa AMP, Rally’s RLY, DerivaDEX’s DDX, XY Labs’ XYO, Rari Capital’s RGT, Liechtenstein Cryptoassets Exchange LCX, Power’s POWR, DFX Finance’s DFX, and Kromatika Finances’ KROM.
The Securities and Exchange Commission argued, “Each of the nine companies invited people to invest with the promise that they would make future efforts to improve the value of their investments.” The regulator wants to refer to the famous Supreme Court ruling, known as the Howey test, which considers an asset as a guarantee if it meets certain criteria.
The Securities and Exchange Commission’s decision sparked a barrage of criticism from the industry, and from regulators and other lawmakers alike.
Go to follow
Coinbase, which can be sanctioned by the Securities and Exchange Commission (SEC) for inclusion in the list of nine tokens, said in a blog post that it has petitioned the Securities and Exchange Commission to improve its “rulemaking on the securities of digital assets” to clarify how federal securities laws are enforced. on crypto assets. .
CFTC Commissioner Caroline Pham lamented in a statement posted on Twitter: “The SEC v. Wahi case is a stark example of ‘regulation through enforcement’.”
“I think this is bad?”
In this context, Senator Pat Tomey (Republican from Pennsylvania) intervened.
“Yesterday’s enforcement action is the perfect example of the SEC having a clear say on how and why certain tokens are classified as securities,” the lawmaker wrote on Twitter. “However, the Securities and Exchange Commission failed to disclose its view prior to taking enforcement action.”
“Do you think this is bad?” Billionaire and Dallas Mavericks owner Mark Cuban commented. “Wait until you see what they come up with to register the tokens. This is the nightmare that awaits the crypto industry. How else can you keep thousands of lawyers working and create grounds to demand more taxpayer money? https://youtu.be/9fDiVXpWp1U.”
The Shark Tank TV star accompanied his post with a YouTube link to a letter left to him by the SEC after he called the agency in 2014 to try to find out if a stock purchase he wanted to make violated insider trading laws. . He did not receive a clear answer. The Cuban, in the video, is following the instructions of the SEC employee but to no avail because he will not have an answer to his question and thus exposes himself to possible punishment for insider trading.
The successful entrepreneur, who has invested in several crypto projects, wants to prove that the US Securities and Exchange Commission is intentionally keeping its rules ambiguous. This is what the entire regulator blames on the crypto industry.
For five years, the Securities and Exchange Commission (SEC) has been regulating the crypto industry through enforcement actions, targeting startups that raised money through initial coin offerings. The regulator, for example, is in a standoff with Ripple, a blockchain payment company based in San Francisco. In a lawsuit, the commission considers that XRP, a token associated with Ripple, should be viewed as a security, which the company rejects.
Another sign of tensions: The SEC has said in the past that it does not consider Bitcoin and Ether, the first two cryptocurrencies by market cap, as securities, but current chairman Gary Gensler remains ambiguous about Ether.
Gensler told lawmakers last May that bitcoin is a “commodity token” but avoided questions posed to Ether.