In November last year, after the US Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC) and the US Department of Justice launched an investigation into the cryptocurrency exchange FTX, pressures on crypto assets and trading platforms began to increase in the country.
While federal regulators in the USA focus on oversight of crypto issuers and trading platforms, the crypto industry continues to struggle with lawsuits filed one after another.
While the SEC and CFTC are investigating FTX’s liquidity crisis, the US Department of Justice’s investigation focused on criminal violations such as “fraud”.
The arrest of Sam Bankman-Fried, the Founder and former Chief Executive Officer (CEO) of the Cryptocurrency Exchange FTX, in the Bahamas following the US criminal complaint and the subsequent litigation process also kept the discussions on crypto asset platforms alive.
While the SEC considers most tokens to be “unregistered” securities, it has taken action against crypto asset issuers and trading platforms on the grounds that they have failed to register with the Commission and thus violate securities laws.
The lawsuits filed by the Commission against cryptocurrency exchanges Binance and Coinbase and digital payment network Ripple, citing rule violations, received wide coverage.
“Commission refuses to provide guidance”
In June, the SEC filed a lawsuit against the entities of the cryptocurrency exchange Binance and the company’s founder, Changpeng Zhao, on 13 charges. Among the accusations; The allegations included various securities law violations, including the operation of unregistered exchanges and clearing agencies, misrepresentation of trading controls and oversight on the Binance.US platform, and unregistered offerings and sales of securities.
Binance, on the other hand, claimed that it had actively cooperated with the SEC’s investigations from the very beginning, but despite all its efforts, the SEC abandoned the negotiation process and acted unilaterally.
Emphasizing that it will defend strongly in the case, Binance claimed that the “SEC’s refusal to engage productively” also shows that the Commission consciously refuses to provide the digital asset industry with the clarity and
guidance needed.
A day later, the SEC filed a lawsuit against Coinbase, accusing it of operating the platform as an unregistered securities exchange, broker and clearing agency.
Coinbase CEO Brian Armstrong emphasized that they acted in accordance with the law and trusted the facts, and welcomed the opportunity to appear in court.
Crypto Asset Platforms Seek Their Rights in Court
Court decisions that could set a precedent on the subject in the USA have caused confusion. The lawsuit filed by the SEC in December 2020 against Ripple Labs, the company behind XRP, and its managers, accusing them of “unregistered securities offering”, was concluded in favor of Ripple.
Judge Analisa Torres of the Southern District Court of New York ruled in July that Ripple did not violate federal securities law by selling the cryptocurrency XRP on exchanges.
Ripple had argued that XRP, a token developed to facilitate cross-border payments, was not a security.
Thus, for the first time in the United States, a judge ruled in favor of a cryptocurrency company, recognizing that certain digital asset sales fall outside securities laws, while analysts stated that not considering XRP as a security would set a precedent for other cryptocurrencies.
Consideration of crypto assets as securities or commodities; When determining whether certain tokens and firms are subject to SEC or CFTC regulation, the crypto industry has argued that regulatory approaches to enforcement in the industry do not adequately serve investors or issuers.
Last month, Binance filed for a protective order against the SEC on the grounds that its requests for information were “overly broad” and “too burdensome.” The cryptocurrency exchange argued that its US companies BAM Trading and BAM Management had already provided sufficient information to the SEC.
On the other hand, the SEC’s decision to reject crypto asset management company Grayscale’s application for a spot Bitcoin exchange-traded fund (ETF), arguing that “a Bitcoin-based ETF lacks adequate oversight,” was overturned by the federal appeals court.
“Crypto industry is non-compliant with securities laws”
SEC Chairman Gary Gensler reiterated his criticisms of crypto during a hearing in the US Senate’s Banking, Housing and Urban Affairs Committee on Tuesday.
Saying that there is widespread non-compliance with securities laws in this regard, Gensler argued that most tokens are subject to existing securities laws. Gensler called the crypto industry a “space full of abuses.”