SEC, the lawsuit is the inside out of impatience ── Trying to dispel the clumsiness at FTX | CoinDesk JAPAN | Coin Desk Japan

The US Securities and Exchange Commission (SEC)’s daily lawsuit against Binance and Coinbase was not a bolt from the blue. The question of how to regulate crypto-asset (virtual currency) exchanges has been hotly debated for many years, and although the specifics of the SEC’s approach are highly controversial, the SEC will It was only a matter of time to pursue

But the message surrounding this lawsuit makes the SEC’s latest move seem weak, ex post facto, political, and frankly, under the hood.

Specifically, the SEC appears to be equating Binance and Coinbase with a string of fraudulent organizations that will go bankrupt in 2022, including Terra, Celsius Network, and above all FTX. is.

It is widely believed that the SEC treated FTX with respect until it turned out to be a giant fraudulent organization, and now it seems that they are trying to show the public that they are a strict regulator at heart. But it was years too late to take a hardline stance, and it was the wrong target.

Essentially, the SEC wants the American public to see this lawsuit as part of a campaign to combat fraud. But in reality, it’s a patriarchal attempt to keep people away from investments that the SEC thinks are wrong. Equalizing fraudulent companies with Binance or Coinbase is grossly unfair to both the targeted companies (especially Coinbase) and the American public, who expect an expert opinion from the SEC.

crime and crime

The SEC, like all politicians and regulators, cannot be expected to distinguish between crimes that violate the law and crimes that actually harm or exploit people. Regulators enforce the law, not morality per se. However, such a distinction does not exist.

The SEC’s core allegation in Coinbase’s lawsuit is simply that Coinbase “has deliberately planned to enable trading of crypto assets in order to increase its own revenues, which were primarily derived from transaction fees from its customers.” It means that

Whether Coinbase has complied with the rules in the way the SEC claims is a complicated debate. But the essence of the SEC’s allegation is that Coinbase violated the rule by creating a service that customers (myself included) actually use and then trying to improve it.

Whatever it is, it’s not a sin, in the words of actress Mae West.

But Coinbase’s lawsuit is portrayed as if it were done to protect investors from a sophisticated and deadly predator. In a statement quoted by the SEC on social media, SEC executive director Gurbir S. Grewal said, “By its calculated decisions, Coinbase… We were able to rob and make billions of dollars at the expense of our investors.”

Binance, by contrast, has been accused of several genuine crimes, especially price fixing that harmed its customers. Other charges against Binance, however, deny it the right to provide services that customers clearly want.

If the protections Mr. Grewal wants include reporting and transparency standards for assets similar to those that exist in the stock market, it is clear that US and global exchanges would welcome such a regime. deaf.

In reality, however, the SEC appears to believe that cryptocurrency exchanges are exploiting customers by allowing them to do stupid things like buying crypto assets of their own free will.

“We don’t need digital currency”

The SEC lawsuit against Coinbase, among others, is based on the moral assumption that cryptocurrencies are inherently fraudulent and worthless. In doing so, the public sees Coinbase CEO Brian Armstrong and Sam Bankman-Fried as one and the same. Despite the fact that the former has been running a stable and reliable service for ten years and the latter is an incompetent idiot who lacks both morals and basic math skills.

SEC Chairman Gensler further emphasized the ploy to confuse the public on June 6 on CNBC. He first argued for SEC neutrality regarding asset quality. But then he went on to develop a thorough and frankly poor argument for crypto assets: “We don’t need digital currency. It’s called, they’re all digital now.”

This is more than an embarrassing lie. Chairman Gensler should know the truth. After all, Gensler once taught blockchain to students at the Massachusetts Institute of Technology (MIT).

Chairman Gensler sees a conflict between the banking sector, which he and the U.S. government so repressively, directly, and politically controls, and the cryptocurrency network, which they do not, and ultimately can never control. You can’t really believe that there is no distinction between them.

In short, Chairman Gensler seems to have devoted himself wholeheartedly to misleading the public about fundamental facts.

shame of being involved

The real grand conspiracy here is the SEC looked awful after the collapse of FTX and now they’re shotgun blasting the industry to prove a point.

—HE Cas Piancey (@CasPiancey) June 7, 2023

“The real grand conspiracy this time around is that the SEC has gotten really bad after the FTX bankruptcy and now they are launching an all-out attack on the industry to prove they are right.”

All of this is best understood in the context of what happened in 2022. The SEC and other regulators have done pretty well to the fraud at the height of the crypto asset bubble. They exerted effective pressure on Do Kwon’s Terra and Alex Mashinsky’s Celsius Network.

But Gensler has personally shamed Sam Bankman-Fried and FTX. Especially since the SEC staff reportedly had ongoing discussions about FTX and crypto regulation.

That familiarity may be why the SEC overlooked the fraud. At least one lawmaker has publicly held Gensler to blame for the damage caused by FTX. Bankman-Fried’s speaking out on regulation bolstered the impression that he had a special relationship with regulators.

While the SEC has legitimate reasons for suing Binance and Coinbase, the impression of the SEC and Chairman Gensler’s FTX rework is unavoidable. But they are not all the same, and misleading the public could endanger Gensler’s position in the long run.

｜Translation and editing: Akiko Yamaguchi, Takayuki Masuda
| Image: SEC Chairman Gary Gensler (CoinDesk)
｜Original: The SEC Is Fighting the Last War