By Michael Peres
The US Securities and Exchange Commission (SEC) is forging ahead in its pursuit to get some crypto lending companies registered if they operate more as investment firms. This comes after Gensler has repeatedly stated that some crypto assets meet the definition of security and therefore should be regulated by the SEC.
SEC Chair Gary Gensler said on July 21 in a CNBC interview that the decision of whether to include crypto options in their portfolios for clients lies with large financial institutions but the risks of crypto tokens would need to be made public. He went on to say that they were working to get these firms properly registered under the security laws. Gensler had urged the biggest exchanges such as Coinbase (COIN) and BlockFi to voluntarily register with the SEC saying that otherwise they are operating outside of the law.
BlockFi came to heel in February this year after it agreed to pay $100 million in penalties and agreed to the registration of its crypto lending product. According to the SEC press release, BlockFi was charged with failing to register the offers and sales of its retail crypto lending product and violating the registration provisions of the Investment Company Act. This is the first of its kind and many have speculated that this is just the start.
Coinbase, on the other hand, remains adamant that it does not list securities. Several days ago, Coinbase’s Chief Legal Officer, Paul Grewal, wrote in a blog post, “Coinbase does not list securities. End of story.” The blog post follows the SEC’s decision to file security fraud charges against a former Coinbase employee and two others claiming that nine digital assets involved are securities. The Department of Justice (DOJ) also investigated the case, choosing not to file securities fraud charges against those involved.
Coinbase has filed a petition for rule-making with the SEC after voicing numerous times that there is an absence of a concrete digital asset securities regulatory framework from the SEC.
Many are speculating what the SEC’s next move will be as they continue to work to get the crypto market to comply with federal securities laws. One scenario that has been offered up is that the SEC will offer assurances that they will not take legal action if crypto market participants meet the requirements set out by the SEC. However, this is also likely to lead to a significant number of enforcement actions for those who do not comply.
In recent months, both Bitcoin and Ethereum have taken a nosedive, with Coinbase and Robinhood also showing a downward turn. While some have assigned this to the aftermath of the Terraform ecosystem collapse in May, even the Web 2 Tech giants like Facebook and Amazon have watched their stock drop. What remains to be seen is just how well the crypto sector can pick itself up again.
Michael Peres (Mikey Peres) is a serial-entrepreneur, software engineer, journalist, tech-investor, and author, best known for founding various technology, media, and news startups. Michael leverages over a decade worth of engineering and leadership experience to advise aspiring entrepreneurs in developing the mindset to build, grow and scale successful businesses.
He has also authored The Road Less Traveled, where he provides insight for aspiring entrepreneurs by documenting the obstacles he faced, how he overcame them, and how others can develop the critical skills needed to take charge of their own future.