The SEC and Crypto: A Rocky Relationship
Over the past year, the SEC has made headlines numerous times next to the names of one cryptocurrency or another. From the Ripple case, which refuses to end, to the approval of Bitcoin ETFs, it seems almost impossible to predict what will happen between the SEC and crypto next.
Even though we can’t predict future events, we’d like to take some time to discuss the rocky relationship between cryptocurrency and the SEC. Keep reading to learn more.
The SEC and Ripple
The SEC and Ripple are in the middle of a years-long court battle over whether or not Ripple constitutes a security. In recent news, the district courts ruled that selling Ripple on an exchange did not constitute as a security and was thus legal.
The SEC has appealed the decision and is taking the case to the Supreme Court—which is interesting considering that the SEC has already been able to fine Ripple $125 million for selling their crypto to institutional investors…so what more does the SEC want at this point? We aren’t entirely sure to be honest.
Although this case has already been going on for nearly two years, it will likely continue for two more, as the case is set to be heard in late 2024 (we are already in October) or early 2025 and will likely not conclude until 2026.
Anti-Crypto Gurbir S. Grewal Leaves the SEC
On October 2nd, 2024, it was announced that Gurbir S. Grewal is leaving the SEC after a 3-year stint. While this might be bad news for some, this is excellent news for cryptocurrency firms. He will officially step down from his post as SEC enforcement director this week, on October 11th, 2024.
Gurbir was notoriously anti-crypto, suing approximately 100 crypto firms during his short tenure. Although he has many fans, we are hopeful that his departure will usher in a new age for cryptocurrency on a government level. He has not only headed the case against Ripple Labs, but also the ones against both Kraken and Coinbase, so we can’t say we are sad to see him leave.
The SEC Approves Crypto ETFs
Despite all this bad news, the SEC did make a few pro-crypto moves this year, and one of those was to approve both Bitcoin ETFs and, later, Ethereum ETFs.
It’s a bit weird to us that a government entity that has been so against crypto in the past is suddenly allowing these changes to come through. We wonder is this has something to do with Gurbir leaving the SEC—but alas, this is all just speculation.
Related: Bitcoin vs Ethereum ETF: Why One is Underperforming
The SEC vs Lejilex
Lejilex is a cryptocurrency startup that, although they just recently launched is already locked in their own legal battle with the SEC. Lejilex has stated that it is an exchange which will only list and trade non-securities, and in true SEC fashion, the SEC would like to oversee this exchange.
The Coinbase CEO has even entered the fray, arguing on behalf of Lejilex and stating that the SEC is clearly overreaching. It is unclear when this case will be head, though the lawsuit was filed in February 2024, alongside other notable lawsuits such as the SEC vs Coinbase and the SEC vs. Kraken.
What the SEC Says About Crypto
All of these headlines paint quite the odd picture of how the SEC feels in regard to cryptocurrency and other digital assets. If you head to the SEC page, they state that their role is to protect consumers from malicious actors in the investment space.
If that’s the case, why is the SEC spending so much time going after centralized investment platforms like Coinbase and Kraken? To be honest, we aren’t sure, but we have a feeling that it is a simple yet elaborate money grab.
Also, the SEC wants to do this using rules and regulations, which, in many cases, cryptocurrency firms argue do more harm than good in the industry—stifling creativity and innovation.
Honestly, we have found their stance on crypto to be confusing at best. After all, if it’s so dangerous, why approve the ETF? We answer this by reminding readers that the SEC is a large group of individuals working together to make regulations, and we highly suspect that while some members of the SEC are against cryptocurrency in all forms, others are for it. Specifically, the current SEC Chair, Gary Gensler, is openly anti-crypto. Hence, the final result is a wishy-washy, unclear position on the topic.
It is worth noting that Gensler’s position could be coming to a close depending on the outcome of the upcoming elections. Although his term is supposed to last until 2026, Trump has made it clear, that if elected, Gensler will be fired. We will have to wait until after the election to see if this is indeed the case.
Related: Ethereum and the SEC: The Drama Unfolds
Pending Proposals from the SEC
We haven’t been the biggest fan of the SEC in recent years, especially as they have targeted beloved cryptocurrency companies, we do have to admit that they are making waves and creating new projects at a rapid pace—some of which are good.
In August 2024, the SEC announced that it will issue 13 proposals in the coming year, some of which are slated for Q4 2024. All of these proposals are listed on its website, and they vary in topic. Some concern crypto, some general financial regulations, and our personal favorites are those that ensure financial transparency from large commercial businesses and government agencies.
We aren’t sure which of the proposals will be reviewed, especially if Gensler leaves. That being said, we hope that widespread change is on the way in the United States in terms of cryptocurrency. Because while the SEC hasn’t been our favorite in the past, we are fans of corporate transparency, though we could skip some of the cryptocurrency restrictions.
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