Despite recent legal setbacks, SEC Chair Gary Gensler is still committed to regulating the cryptocurrency space. He is set to deliver this message at a Senate Banking Committee hearing on Tuesday.
In his prepared testimony, Gensler highlighted the widespread noncompliance with securities laws in the crypto industry. He compared it to the pre-regulation era of the 1920s and stressed the need for regulatory oversight. According to Gensler, most crypto tokens fit the criteria of investment contracts, making them subject to securities laws.
The SEC has recently faced legal defeats, especially in cases involving Grayscale and Ripple. These losses have encouraged other crypto companies facing SEC lawsuits to challenge the agency’s authority. Notably, a judge partially ruled in favor of Ripple, stating that the sale of XRP tokens didn’t violate federal securities laws.
Another setback for the SEC was when a judge deemed its rejection of Grayscale’s request to convert its Bitcoin Trust into an exchange-traded fund (ETF) as “arbitrary and capricious.”
LBRY, a blockchain-based payments network, is also contesting an SEC ruling instead of shutting down. In March 2021, the SEC sued LBRY, alleging that their token LBC wasn’t properly registered. This sparked a significant debate. Although the SEC didn’t accuse LBRY of fraud, it sought permanent injunctions and the return of all funds.
Jeremy Kauffman, LBRY’s CEO, expressed concerns that the ruling could harm many U.S. cryptocurrencies. Consequently, major players like Binance and Coinbase have threatened to leave U.S. markets unless clearer guidelines are provided.
Critics argue that Gensler’s strict regulatory stance is harming the crypto industry. Some speculate about the potential political consequences of this approach, especially as the 2024 elections approach. There are concerns that Democrats may advocate for a more moderate stance to avoid negative electoral consequences.
Read More: “You are Making a Mockery of the US Government”: Crypto Community Slams SEC’s Ripple Appeal
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