PYMNTS-MonitorEdge-May-2024

SEC’s ‘Forever War’ on Crypto Enters Year 7

SEC and crypto

Next year marks the seventh year of the SEC’s battle to regulate cryptocurrencies.

The Wall Street Journal describes the Securities and Exchange Commission’s (SEC) campaign to rein in digital assets as the regulator’s “forever war” in a Thursday (Dec. 28) report, noting that 2024 may not bring about a resolution to the question of who regulates crypto.

“When you do regulation by enforcement, this is how long it takes,” Jan Folena, a partner at Stradley Ronon who has tried major cases for the SEC, told the WSJ.

“There is no shortcutting it. You can’t go to the court and say, ‘We need an answer fast because nobody else is doing anything.’”

Among the agency’s most high-profile cases, Coinbase — the largest U.S. crypto exchange — will next month ask a federal judge to throw out the SEC’s lawsuit against it. That suit alleges that Coinbase violates investor protection rules. However, the WSJ says that courts aren’t given to dismiss SEC suits at an early stage, meaning the case could stretch into 2025.

The report also notes that while the SEC has been attempting to regulate crypto since 2017, it was only after current Chairman Gary Gensler took over that the regulator has taken a new approach, targeting major exchanges that sell coins to the public.

The SEC has a “pretty unblemished record” of enforcement against crypto companies, Hilary Allen, a professor at American University College of Law, told the WSJ.

In addition to Coinbase, the SEC has also sued Binance, the world’s biggest crypto trading platform, and Kraken, America’s second-largest exchange. All three agencies have denied the SEC’s charges and say they will defend their practices in court.

These are the cases that will make a difference, the report said.

“If the SEC loses these cases, it won’t have the wind at its back in the same way it currently does,” Allen said.

PYMNTS wrote in June that the suits against Coinbase and Binance — filed within a day of each other — marked a “sharp escalation of the SEC’s efforts to rein in the crypto industry.”

It was a case, that report said, of the regulator deciding “that after a year full of fraudulent evaporations and disastrous bankruptcies as exemplified by the November blowup of the crypto exchange FTX and the rapid fall from grace of its founder, Sam Bankman-Fried, innovation run amok might be worth stifling.”

PYMNTS-MonitorEdge-May-2024