Coinbase's Chief Legal Officer reacts to the SEC's proposed rule change targeting crypto...
Video Courtesy Of CNBC
In a sign of how seriously this is being taken, the investigation into Biden's appointed head of the SEC comes from a member of his own party, Representative Ritchie Torres (D-NY) is requesting the Government Accountability Office (GAO) to conduct review of the SEC’s actions leading up to FTX’s collapse last month.
“If the SEC has the authority Mr. Gensler claims, why did he fail to uncover the largest crypto Ponzi scheme in US history?” Torres wrote. “One cannot have it both ways, asserting authority while avoiding accountability.”
Torres continues to drill into the Chairman "The operating principle of the SEC must be protection for the investing public, rather than publicity for the political appointee in charge" a reminder of Gensler's investigation into Kim Kardashian's tweet promoting a cryptocurrency, concerned that Gensler was preoccupied with inconsequential but high-profile acts while ignoring less glamorous but necessary responsibilities.
One of those demoralized colleagues is SEC Commissioner Hester Peirce, who has remarked in interviews that Gensler's approach to regulation is "not a good way to regulate" and is not surprised to hear that many have "given up on us."
The SEC has the ability to issue a company an 'exceptive order' which basically results from the company's leaders being able to come in and address concerns with SEC officials. If the SEC believes they are operating outside of the rules unintentionally, this exceptive order serves as an agreement that allows the company to fix what is wrong within a limited timeframe, and the SEC agrees to hold off any enforcement actions against them during that timeframe.
Zero exceptive orders have been issued since Gensler took over, which shows how badly he destroyed what should be a healthy relationship between regulators and the companies they regulate.
Legitimate businesses should never fear requesting the SEC review their plans or practices, to verify they are in compliance with all relevant regulations. Under Gensler, companies fear they'll leave the meeting with an enforcement action against them.
SEC agents who previously believed their role involved providing assistance and guidance, backed by the ability to enforce the rules, have quit in record numbers as their job changed to simply 'punishing people'.
Since the first in 2013, SEC actions against cryptocurrency companies and startups had been on the rise. But according to recent statistics from economic research firm Cornerstone Research, 2021 marked the first year these actions decreased.
The obvious question is - why? Perhaps simply Covid and a generally backed-up legal system, meaning while prosecutions may have been delayed, they had not deceased.
Others say the difference is Gary Gensler, who was appointed director in 2021 and his experience prior to joining the SEC - as a professor of bitcoin and blockchain at MIT...
Lawmakers and politicians with misconceptions about cryptocurrency, and often a general ignorance of technology in general remain the biggest threat. But with the appointment of Gensler many of crypto's supporters are feeling a bit less worried, as it at least appears the SEC is now led by someone with a full understanding of what they're tasked with regulating.
Since 2013, the SEC has taken action in 123 cases that focused on cryptocurrency...
From otherwise legitimate projects that lacked the proper licenses to operate, to full blown Ponzi-scheme style scams.
Since their first crypto based case in 2013 - the amount of actions taken by the SEC each year has only grown, with the amount of cases peaking in 2020 with a total of 35. Last year, 2021, was the first decline in total cases with a total of 24.
Pressure on US Regulators and lawmakers continues to grow, as the industry increases political influence...
Particularly over the past 3 years the crypto industry has put a major focus on making sure their voices are heard by those who will eventually decide how their businesses will need to operate.
Getting to a position where they can be heard involves playing the game - political donations, charities, resources, speaking engagements. Cryptocurrency company founders and executives are being spotted in every corner of Washington DC these days.
Inside the crypto industry, as they go inside Washington DC...
The US crypto industry has accepted that new regulations are eventually coming - so the sooner they know what they will be, the better. Over the years we've heard multiple large investors and investment firms say regulatory uncertainty is their main reason for still sitting on the sidelines.
While acknowledging the urgency for clarity, they cannot push so hard that politicians feel pressure to just 'do something' - sacrificing the time needed to draft reasonable, productive, and positive guidelines.
"The end goal everyone wants is a stronger, more stable industry, with better protected and informed investors and traders - and we're positive this can be achieved" says a contact from one of the major US crypto companies involved in lobbying Washington DC, who asked to remain unnamed, and that we note they are speaking as an individual and not a spokesperson for any organization.
But they also believe that completing their current goal must come before anything goes up for a vote, which my contact describes as 'educating lawmakers, because if there was a vote today I think about 10% of them would understand the impact of what they're voting on".
Which isn't as simple as addressing Congress and the Senate with a '1 size fits all' speech, my contact explains "There's a huge range of experience among lawmakers when it comes to finance and tech. That's why it's about asking for just a few minutes to speak to them 1 on 1 - and then we don't just lecture them on crypto but also make them feel comfortable to ask questions and raise concerns".
So, while the industry wants a resolution soon, a plan that aims for informed people making smart decisions comes with a speed limit.
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Author: Justin Derbek
New York News Desk
Global Crypto Press Association / Breaking Crypto News
The SEC has hired a company out of California named 'AnChain AI' and begun a 5 year contract reportedly costing $625,000 - with the goal of implementing greater oversight over the world of decentralized finance platforms (aka DeFi).
Company CEO and co-founder Victor Fang says they "will provide the technology to analyze and track smart contracts". AnChain AI says their software uses artificial intelligence and machine learning, and includes a tool that flags potentially suspicious transactions and wallets.
Fang says the big picture is to stop “post-incident investigations” by preventing the incidents to begin with, which he describes as “defense all the way up the upstream”.
They list Microsoft and crypto exchange Huobi as clients.
The SEC Has Not Yet Commented On The Deal, But Recent Quotes From It's Director Give Us Some Insight...
Since April of this year Gary Gensler has been the director of the SEC, and he isn't new to Bitcoin - he taught a class on it at MIT. So many give him the benefit of the doubt when he says the organization's goal is always to protect investors.
With so many politicians clearly uneducated on crypto, supporters hope that his knowledge about Bitcoin will translate into common sense regulation actions.
Gensler recently spoke to the Wall Street Journal, where he stated that DeFi projects are not immune to regulation, and aren't as decentralized as many believe - often having some centralized elements.
Likewise, even if the app itself is decentralized, if a small group of developers make all the decisions for it, that's a form of centralization as well.
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Author: Mark Pippen
London News Desk / Breaking Crypto News