SEC, full-scale war against crypto assets ─ What should we do | CoinDesk JAPAN | Coin Desk Japan

Last week, the U.S. Securities and Exchange Commission (SEC) sued Binance and Coinbase, engulfing all three branches of the U.S. government in a power struggle, leaving the crypto industry out of the U.S. forever. The battle on the brink has begun to decide whether to withdraw to the future and the future of digital money.

far from slam dunk

The SEC’s aggressive actions against Binance, the world’s largest cryptocurrency exchange, and Coinbase, the largest US cryptocurrency exchange, are a powerful display of power that underscores the commission’s extraordinary discretion. “We don’t need more digital currencies,” said Gensler in an interview following the announcement of the lawsuit, suggesting that he really wants to destroy the cryptocurrency industry.

By suing Binance, a thoroughgoing global company, and Changpeng Zhao (aka CZ), a well-known CEO, for allegedly providing unregistered securities and commingling client funds, the SEC is doing just that. tried to prove that the reach of the was extended beyond the United States.

The Coinbase lawsuit is clearly aimed at a wider range of players than just the company itself. The lawsuit is premised on the idea that most of the tokens traded on San Francisco-based Coinbase are unregistered securities, with token issuers such as Algorand, Polygon and Solana. It poses legal concerns for companies.

And it directly pursues the centralized finance (CeFi) system that Binance and Coinbase’s custody model is based on, and indirectly some of the key protocols that decentralized finance (DeFi) relies on. are doing.

But for the SEC, this is far from a slam dunk. First, if the SEC’s case against Ripple Labs three years ago is any guide, these cases are likely to remain inconclusive for years. Both Coinbase and Binance have put up a tough fight in court, straining the resource-poor SEC enforcement team with a huge amount of work.

The SEC’s hardline approach is also not widely supported by other branches of the US government. The timing of the lawsuit made it seem like the SEC was ordering other agencies to follow suit.

Status of Other Agencies: Congress, White House, Supreme Court

firstparliamentLet’s take a look from

A bill to be introduced soon to the House of Representatives would set the parameters for how digital assets are classified, limit the SEC’s power to interpret crypto assets to within existing securities laws, and enforce enforcements like this one. curbing the ability to initiate action.

The bill targets Republican Rep. Patrick McHenry, chairman of the House Financial Services Committee, who has been critical of SEC Chairman Gensler’s belligerent behavior against the crypto industry, and a bigger voice in crypto regulation. It was co-sponsored by Republican Rep. Glenn Thompson, chairman of the Agriculture Committee, which oversees another major body, the Commodity Futures Trading Commission (CFTC).

Whether the McHenry-Thompson bill will pass the Democratic-controlled Senate and eventually become law is doubtful during the current term, but with the election season in full swing, the bill is of critical importance. become a point of contention.

Next, governing the SEC and other regulatory bodiesWhite House. This lawsuit means that the future of crypto and digital assets will also carry over into the presidential election. Three presidential candidates have already expressed their support for crypto assets.

Robert F. Kennedy Jr., the Democratic challenger to President Biden; Florida Governor De Santis, who is seen as a major challenger to former President Donald Trump as the Republican candidate; and biotech entrepreneur, also a Republican candidate. Mr. Vivek Ramaswamy of the house.

Trump, who has been the frontrunner for the Republican Party until now, has a chaotic stance on crypto assets, but he has also used NFTs as a means of raising funds himself (although the recent indictment puts him at risk of running for office). with a big question mark).

Whether or not President Biden is re-elected, all this attention to the cryptocurrency industry will help put the political context in how the SEC will handle these lawsuits in the future.

And finally, last month it curtailed the Environmental Protection Agency’s authority to enforce landowner controls under the Clean Water Act.Supreme Court. What does this have to do with the SEC and crypto assets?

For conservatives, who now dominate the Supreme Court, the Environmental Protection Agency is just the first regulatory agency that needs to be stripped of power. Widespread attacks on government agencies are on the horizon, and the SEC is likely to become a target as well.

In short, the political storm is raging, making it difficult to predict the outcome of the current battle over crypto assets.

the next deployment

This battle is multi-faceted, and the consequences will be great. However, it may take years to see results.

If SEC Chairman Gensler’s all-out offensive strategy succeeds, it could effectively be a death knell for the US cryptocurrency industry. Developers will move en masse to countries and regions that are actively developing regulations for cryptocurrency innovation, such as Dubai, Bermuda, Singapore and France.

However, this does not mean that the idea of ​​bank-licensed stablecoins and real-asset tokenization strategies led by existing regulated entities and private companies will not be allowed or encouraged in the United States. .

However, some of them are based on the premise of interlocking with the permissionless architecture of crypto assets that the SEC “prohibited” from handling, and the outdated American capital market is a program that is nurtured in other countries. may struggle to compete with newer models with more money and decentralized governance.

Alternatively, the wave of attacks could be counteracted by the passage of time, by counterattacks by crypto-supporters in Congress and courts. But what then?

beyond politics

If a victory will only make the issue more politicized and partisan, then a bigger, more important battle must be fought. It’s a battle to be accepted by the mainstream and achieve widespread adoption.

What we need to be comfortable with is that the topic of crypto assets transcends politics. It would be great if this came naturally. Because at the end of the day, crypto assets are technology and should be irrelevant to politics.

Unfortunately, the cryptocurrency community has to deliberately make it happen. Emphasis should be on educational efforts that demonstrate real-world use cases and demonstrate the benefits that decentralized value exchange and data sharing approaches bring to humanity.

Instead of ignoring the political show unfolding in Washington, D.C. and staying out of the political process, we must figure out ways to get involved in ways that appeal to both sides.

One of them is to focus on positive stories. In a time of great uncertainty, with climate, geopolitical tensions, and the rapid advancement of AI, there is no doubt that there is a market for stories, regardless of political stance.

｜Translation and editing: Akiko Yamaguchi, Takayuki Masuda
| Image: SEC Chairman Gary Gensler (CoinDesk)
｜Original: The SEC Has Started an All-In Political Battle Over Crypto