Oh, the glorious spectacle of SEC’s recent bloodlust. First it was Coinbase, then Binance, and by the time you read this, Kraken and every other major exchange are probably next in line for the chopping block. It seems Gary Gensler and his team are having a grand time drafting legal documents in their crusade against the bad, bad, unregulated crypto exchanges. It’s giving heavy french revolution ‘turn on the guielletiene and chop off everything that lives and breathes’ vibes – minus the fancy dresses and pomp.
I’m pretty sure in the SECs head it’s a classic David vs Goliath situation – and, of course, they are the good guys. Im not sure I agree with that assesment, history shows that the US often left behind a trail of bloodshed in their quest for justice and righteousness (minus, perhaps, WWII). Now the crypto world is in shakles, at least shortly everything tanked a bit, allowing the rest of the world to buy the dip. Seems like the SEC is playing ghost spreading some FUD (Fear Uncertainty Doubt) like Halloween came early this year.
But what’s really the core issue here? Shall we have a closer look? The SEC, in their tightening grip on the ‘wild west’ of the cryptocurrency market, has sued Coinbase, the largest crypto trading platform in the US, and accused Binance of mishandling customer funds. In doing so, they’re trying to force the crypto sector into a mold more befitting traditional financial firms. A mold that, quite frankly, doesn’t fit. The crypto market may share traits with the traditional financial market, but they are far from identical.
What’s more, it’s utterly comical that Coinbase, which sought more clarity on regulations and even asked for a way to register, is now being slapped with a lawsuit. “There is no path to ‘come in and register’ — we tried, repeatedly.” Armstrong (CEO of Coinbase) wrote. “Instead of publishing a clear rule book, the SEC has taken a regulation by enforcement approach that is harming America. So if we need to avail ourselves of the courts to get clarity, so be it.” In a statement to CNN, Coinbase’s chief legal officer Paul Grewal echoed Armstrong’s statement and added: “The solution is legislation that allows fair rules for the road to be developed transparently and applied equally, not litigation.”
It seems like the SEC, acting like a sore loser, is intent on moving goalposts and rewriting the rules of a game they already approved. After all, this company went public, jumping trough countless rules and checks. You didnt notice, two years ago, when you approved their IPO that they were an unregistered securities trader??? Should we view this as incompetence or corruption, I’m not sure where to stand.
The whole spectacle has more of a tv show than a legal drama, the SEC using attention grabbing headlines that one is normally only used to from buzzfeed and not yet confirmed statements it apparently heard from Binance CEO Changpeng Zhao “We are operating as a fking unlicensed securities exchange in the USA bro” . Fire words, if he did say them himself, absolute chad move. But really, that was your title headline for an official legal document release on twitter? Which intern picked that?
The fundamental question here, however, is whether we need more regulation or less?
Crypto failures such as FTX, 3A, and Celsius have sparked calls for more regulation. But all these were traditional financial companies operating within the crypto space, not decentralized exchanges or protocols. Their failures were a result of common issues seen in traditional finance: illiquidity, insolvency, and potential fraud.
Current regulations can actually impede consumers’ ability to protect themselves against risk and fraud. Americans can’t purchase cryptocurrencies directly, but must go through centralized exchanges like FTX. This makes it harder for them to hold crypto assets in their own self-hosted wallets or in regulated custodial banks, which ironically, SEC regulations also prevent.
Let’s not confuse the issue. Regulators must do their jobs effectively. Crypto lenders like Celsius should be regulated like banks, and traditional financial exchanges like FTX should be regulated as such. Excessive regulation on the crypto industry, however, will likely make it riskier, not safer. Decentralized protocols built on the blockchain are already more secure and transparent than many regulated financial companies. Because, you know, you can see the funds at all times and a liquidity pool on uniswap cant run illiquid, because, the code needs to check if liquidity is there before the transaction can get trough. (it can, however, loos depth, which you could argue, is a similar thing. Meme me on twitter if you care for a debate). I’ve never done much coding in uni but it alludes me how the SEC has somehow not grasped this yet.
So, amidst all this drama, should we be worried? From my perspective, the US can keep running around in circles, regulating and suing all they want. Centralized exchanges aren’t the most customer-secure platforms anyway. The rest of us will be here, buying the dip and taking home the profits. Because what are we thinking, crypto now being declared a security has somehow changed the underlying technology of the probably most awesome tech we’ve seen in years? Right. Didn’t think so.