SEC’s ad hoc approach reveals its weaknesses[Column]| coindesk JAPAN

The US Securities and Exchange Commission (SEC) launched a triple attack on March 22nd. Coinbase, America’s largest cryptocurrency exchange, said it has received a warning from the SEC that it intends to sue for violations related to its staking service and possibly its token listing.

Separately, the SEC has sued Justin Sun, one of the richest and most influential entrepreneurs in the cryptocurrency industry. It also targeted several celebrities who promoted Tron-related projects Sun founded.

send a message

As for Coinbase, many of the details are still unknown. Coinbase received a warning of possible legal action, known as the “Wells notice.” Last month, Paxos also received money over stablecoin Binance USD (BUSD). The notice has not yet been made public, but many understand it as a sign that the SEC is finally taking action against crypto exchanges simply because they are crypto exchanges.

Related article: SEC warns Coinbase for suspected violations of securities laws

Just like when it sued Kim Kardashian, a popular social media and reality TV celebrity, for failing to disclose that she was paid to promote EthereumMAX (unrelated to Ethereum), the SEC issued a message. trying to send SEC Chairman Gensler doesn’t have the resources to go after all the celebrities and influencers, so he has to pick and choose. Targeting top celebrities with millions of social media followers, it hopes to spread the message.

In Justin Sun’s case, he and his companies Tron Foundation Limited, BitTorrent Foundation Ltd. and Rainberry Inc. were sued for allegedly offering and selling unregistered securities. There were also allegations of market manipulation, including inflating the price of the cryptocurrency Tron (TRX) by wash trading, and directly paying eight celebrities to advertise to disguise interest from investors. is

Related article: SEC sues Tron founder Sun for allegedly selling unregistered securities and manipulating the market

Six celebrities, including actress Lindsay Lohan, YouTuber Jake Paul, rappers Lil Yachty, Ne-Yo, and Akon, have already settled with the SEC, ending their fines, return of unfair gains and interest payments. Paid a total of $400,000 in the form. A win for the cash-strapped SEC.

Gensler has put the entire crypto industry under his jurisdiction, saying that almost all crypto assets other than Bitcoin are securities. Gensler also said that all those who received compensation to advertise must disclose their compensation.

show weakness

But the fact that things like this keep happening and the SEC has to continue to escalate enforcement actions only shows the SEC’s inability to handle crypto assets. With six celebs reconciled, how many are still out there? Even if all bad actors were identified, how many could actually be pursued?

Ironically, by trying to show off its power over the cryptocurrency industry, it has essentially exposed its powerlessness. Just suing Kardashian after the FTX bankruptcy was enough to show the poor priority of the regulatory period.

By suing a popular celebrity, it’s like declaring that it can’t even prevent petty crimes like failing to self-report blatant cryptocurrency promotion.

If I were a scammer, I’d be more relieved than worried. Or you may be encouraged. The SEC has set its sights on high-profile targets rather than the so-called “pig slaughter scams” and nefarious projects prevalent in the cryptocurrency industry.

Not only the SEC, but other regulators seem equally guilty of arbitrarily deciding which projects should be regulated. If the implementation of enforcement measures is a matter of probability, there is no deterrent effect. “Maybe I’ll get arrested” is part of the scammer’s job.

Regulatory clarity is essential

The alternative, of course, is regulatory clarification. I won’t go into the details here, but everyone knows, including Chairman Gensler. The problem is that Chairman Gensler has cornered himself, especially by sending a warning to Coinbase.

There is no need to create new rules or consider the peculiarities of how decentralized projects work, he suggests. Crypto assets are evil in and of themselves. This loses sight of the consumers who could benefit from crypto assets, the people the SEC should serve. Crypto assets are too big to deal with, and most of them aren’t bad.

I don’t know yet what will happen next. The U.S. government has effectively declared war on the crypto industry, taking steps to prevent even licensed crypto firms from doing business with banks and to exclude them.

Coinbase will likely opt for a legal battle. If Coinbase can provide evidence to question the SEC’s logic, it could be a long-term game well beyond Gensler’s departure in two years. But Gensler has already left his mark. Let’s hope we don’t add to the scammers by making things even more confusing.

｜Translation and editing: Akiko Yamaguchi, Takayuki Masuda
| Image: TRON founder Justin Sun (Danny Nelson/CoinDesk)
｜Original: The SEC’s Scattershot Approach Shows Its Weakness