The U.S. Securities and Exchange Commission (SEC) continues to be criticized for its approach toward crypto companies and crypto assets. In a recent Forbes report, it has been pointed out that since its inception in 2017, the SEC’s Crypto Assets and Cyber Unit has lodged some 200 lawsuits with at least 80 fraud investigations.
It was pointed out by a notable media outlet as well as many on Twitter that while $1 Billion was lost due to crypto fraud in 2021, $15 Billion has been lost due to the SEC v/s Ripple (XRP) lawsuit when the SEC brought a $1.3 billion non-fraud lawsuit against the enterprise blockchain company.
$1 Billion lost due to crypto fraud in 2021.— Jeremy Hogan (@attorneyjeremy1) August 29, 2022
$15 Billion lost due to the SEC v. Ripple lawsuit.
Who is the SEC "protecting" again?
Gensler Says Crypto Treated Just Like The Market; 200 SEC Lawsuits Say Otherwise. via @forbes https://t.co/ixPbodSbLt pic.twitter.com/dxnLuNaMxF
“The SEC’s broad-brush approach which a priori singles out all crypto offerings, exchanges, lending, decentralized financed, non-fungible tokens, and stablecoins looks like guilty until proven innocent,” pointed out the Forbes article. “So many lawsuits suggest that the SEC prefers ‘regulation by enforcement’ (a lawsuit against a financial actor meant to extract a settlement) rather than ‘regulation by rules’ (express guidelines for the trade of currencies, securities, and other assets).”
Criticism of SEC Chair Gary Gensler
Recently Gensler said, “We can dispense with the idea that crypto lending isn’t subject to regulation. On the contrary, the rules have been around for decades. The platforms aren’t following them.”
Furthermore, the SEC implied that there is no reason to treat the crypto market differently from the rest of the capital markets just because it uses a different technology. Gensler also said, “Non-compliance isn’t the inevitable result of the crypto business model or underlying crypto technology.”
Billionaire Mark Cuban took to Twitter to vent. He said, “Come in and talk to who? Set up an appointment how? You using Calendly these days? Since you understand crypto lending/finances, why don’t you just publish bright line guidelines you would like to see and open it up for comments?”
“Notably Congress promulgated the Administrative Procedure Act (APA) in 1946 to guide agency process to publish notice of rulemaking in the Federal Register and provide opportunity for public comment,” the Forbes article stated. “This standard process seems to have never have happened for crypto assets at the SEC. The SEC website does not include an entry for regulation for crypto, either completed or proposed.”
On the Flipside
- Many crypto scams have been disguised as legitimate services. While the SEC has been criticised for targeting crypto companies, the agency is responsible for the restoration of $2 Billion in monetary relief.
Why You Should Care
In the larger sense, the SEC’s actions to “regulate by enforcement” is seen as a kind of manipulation through arbitrary and capricious decisions and a lack of process and rules.