- The Ripple general counsel has taken aim at the SEC’s overreach and failure to provide regulatory clarity.
- The SEC has been ramping up enforcement actions in recent months, attracting criticism from the industry.
When Gary Gensler was sworn in as the chairman of the United States Securities and Exchange Commission in April 2021, many in cryptoville celebrated. The general logic: he had lectured a blockchain course at MIT back in 2018, so he had to be a crypto fan.
Crypto fans, however, are not celebrating now. Gensler has adopted a regulation-by-enforcement strategy targeting blockchain projects, instead of working with the industry. Crypto advocates have had enough, and some are saying so publicly. Ripple general counsel Stu Alderoty, for instance, has slammed Gensler’s SEC in his latest Wall Street Journal op-ed. Stu argued that instead of protecting consumers, the watchdog’s approach to crypto regulation leaves them “holding the bag”.
How the SEC leaves consumers holding the bag
In a recent Wall Street Journal op-ed titled “The SEC Wants to Be America’s Crypto Cop”, Ripple counsel Stu Alderory indicated that the agency’s chair Gensler is “pushing aside his fellow regulators and front-running President Biden’s executive order” instead of providing regulatory clarity for the booming crypto industry in collaboration with other agencies.
Read More: President Joe Biden’s executive order for cryptocurrencies expected next week
U.S. President Joe Biden signed the crypto executive order on March 9 that called on the SEC and the Commodity Futures Trading Commission (CFTC) to coordinate their efforts at drafting crypto regulations.
Stu cited the recent case with BlockFi where the SEC smacked the crypto lending platform with a record fine that sent it reeling on the “auction block”. In such a case, “consumers weren’t protected, they were left holding the bag,” the Ripple counsel asserted.
SEC’s intensifies focus on crypto enforcement
Alderoty was responding to an opinion piece penned by SEC’s Gensler, in which he claimed crypto assets should not be treated differently from the rest of the capital markets just because they use different technology. Gensler drew a comparison between crypto and cars, noting that modern cars continue to utilize safety belts despite technological advancements in the automotive sector.
Stu dismisses this analogy, saying the SEC is trying to sell gas for electric cars. According to him, the agency is obviously protecting its territory “at the expense of more than 40 million Americans in the crypto economy” rather than providing a clear and comprehensive regulatory framework for the cryptocurrency markets.
Ripple has been mired in a legal scuffle with the SEC since December 2020, when the securities regulator filed a suit alleging that the company’s executives used the XRP token to raise funds through an unregistered securities offering. Ripple’s fight against the SEC is anticipated to set a precedent for how crypto assets, specifically altcoins, should be treated under U.S. securities laws.
The agency has ramped up its enforcement efforts recently, including taking the unusual step last month of naming a total of nine cryptocurrencies listed on the Coinbase crypto exchange that it considers unregistered securities.
The SEC is also onboarding a group of new enforcement attorneys to help the securities watchdog bring cases against more crypto companies.
It’s not just Ripple’s Alderoty. The SEC’s approach to crypto has been met with severe criticism from a number of industry pundits, lawmakers, and regulators alike.
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