CoinDesk has been in the cryptocurrency space for a while now, but recently has been hit by new SEC regulations. We’ll explore the regulatory agenda of Gensler and recent enforcement actions. Plus, we’ll cover Ripple’s legal fight with the SEC. And we’ll talk about the creation of a single trustee for all digital asset securities. Read on to learn more. We’ll also discuss the importance of understanding how SEC regulations impact digital assets.
Gensler’s regulatory agenda
While he has already made the case for more regulation of the crypto market, SEC chairman Charles Gensler wants to go a step further. The commission is considering orders forcing exchanges to separate their lending and trading functions. These rules can be tailored to the cryptocurrency industry, which is not exactly like traditional exchanges. Currently, most exchanges use hosted wallets that act as a form of digital wallet.
Republicans have criticized Gensler’s approach to regulating the crypto market. Gensler counters the assertions made by Republicans, saying that climate change falls outside the SEC’s jurisdiction. He also suggests a ban on the lucrative business model known as payment for order flow, which has drawn the ire of many financial firms. In short, Gensler’s plan is not likely to be a welcome one.
Recent enforcement actions
Recently, the SEC took several actions targeting cryptocurrency. Recently, the SEC requested 33 new full-time positions in its Crypto Enforcement Unit, directing staff to the unit from other priorities. These decisions reflect the agency’s doubling down on cryptocurrency enforcement, at a time when markets are volatile. To that end, these actions highlight the need for better regulation of this growing industry. But what are the current enforcement actions? Let’s take a look.
Until 2021, SEC enforcement actions relating to cryptocurrency were rare. Despite this, the agency has recently taken two actions against executives of a popular cryptocurrency exchange. In both of these cases, the alleged amounts of funds raised through unregistered offerings were very small compared to the previous crypto asset cases. Coinseed and Rivetz both raised almost $30 million from investors in the United States, but the SEC has no evidence to support this.
Ripple’s legal battle with the SEC
The latest lawsuit against Ripple has brought the spotlight on former SEC chairman Jay Clayton, who publicly said that cryptocurrencies were not securities in 2018. But later he joined a hedge fund that took a large position in the cryptocurrency. Clayton’s sudden about-face against cryptocurrency puts him in a tricky position, as the SEC has sought to get his name out in the public and win over progressives. Ripple has also accused Gensler of violating due process and has asked for the defense to be dropped from the case.
But, despite its efforts, the SEC’s legal department has not provided the information Ripple wants. It has not produced any documents that Ripple wants, and the SEC may try to portray Hinman as a rogue agent in the case. However, if the documents are made public, Ripple may be able to use them to counter the SEC’s accusations that it acted arbitrarily.
Creating a single trustee for all digital asset securities
The Association for Digital Asset Markets (ADAM) has submitted a public comment to the Securities and Exchange Commission regarding the custody of digital asset securities by special purpose broker-dealers. ADAM believes that the Securities and Exchange Commission should clarify the definition of a qualified custodian under the Investment Advisers Act of 1940 to ensure that the securities markets operate fairly and efficiently. Moreover, the Association believes that this would foster innovation and promote the integrity of the digital asset markets.
To ensure that the investor’s assets are protected, broker-dealers are required to make written disclosures of material conflicts of interest and the risks associated with custody. Furthermore, broker-dealers and their customers enter into written agreements that define the terms of receiving, holding, selling, transferring, and transferring digital asset securities. These documents should be transparent and contain all terms and conditions of dealing with digital asset securities.