As the SEC and other regulatory bodies step up their policing of crypto, there has been a rousing chorus demanding more legal clarity in the U.S.
Prominent U.S. crypto business leaders have called for codified, clear, and formalized regulatory policies on crypto alongside a transparent framework for companies to operate within.
Following Ripple CEO Brad Garlinghouse’s scathing indictment of the SEC last week, Coinbase CEO Brian Armstrong is doubling down on the calls for clarity amid the SEC’s labeling of cryptos as securities.
“Give Us a Rulebook”
The issue many crypto companies have regarding the SEC’s regulatory scrutiny has not been the agency’s decision to claim jurisdiction over crypto but rather the uncertainty and inconsistency of its enforcement.
In the landmark court case between the SEC and Ripple, the CEO of the embattled crypto firm, Brad Garlinghouse, said the SEC is playing “offense” and “attacking” the industry. Such an approach makes it hard for companies to operate within the law and stay compliant.
There is no framework or rulebook for crypto regulation in the U.S., which is precisely what Armstrong is calling for.
“I think the best thing for us and for the whole industry would be—here's a clear rule book everybody has to follow it. If the rules change, give us a new rule book we'll follow that one. We've actually been requesting that, and we've filed a petition with the SEC on this,” Armstrong said on Bloomberg’s Odd Lots podcast.
Just go Away
Armstrong is not talking in hypotheticals when requesting a rulebook from the SEC. The CEO has close ties to the regulatory agency and has been working with them on exactly those terms—as he admits on the Odd Lots Podcast.
Based on his dealings with people at the SEC, Armstrong claims it would not be surprising if some regulators simply wanted crypto to disappear.
“It wouldn't surprise me if some people there [in the SEC] actually just want it [crypto] to go away. They wish this whole thing would go away. I would hope that that's not a majority view, and I know it's not the majority of Americans.”
“One in five households in the U.S are using this stuff, and they’re just going to use unregulated things offshore if we don’t get our act together,” Armstrong added.
The damage wrought by crypto moving offshore was also highlighted by Garlinghouse, who already sees the exodus happening.
Garlinghouse pointed out that the U.S. once tried to ban the internet before a regulatory framework was decided upon. He believes if the country removes itself from crypto, it will lose its reputation as a world leader in innovation.
On the Flipside
- The SEC’s jurisdiction is predicated on the very broad 1933 Securities Act, which can interpret many different assets as a security. It is not just the Howey Test determining whether an asset is a security.
Why You Should Care
The U.S.’s approach to crypto regulation appears to be ‘enforcement-first,’ which makes it very difficult for businesses to operate. Meanwhile, other nations are setting up strict but clear crypto frameworks, which are far more appealing to companies.