Stuart Alderoty, the chief legal counsel at Ripple, the crypto company behind the token Ripple (XRP), has just criticized the United States Securities and Exchange Commission (SEC) along with Chair Gary Gensler, citing Gensler’s recent comments that every digital asset is a security should have “legal consequences” and the “agency should be held accountable” for its anti-crypto stance.
This comes after Blockchain Association Policy Lead Jake Chervinsky took to Twitter to blast the SEC Chair hinting that Gensler should remove himself from enforcing rules on the crypto sector, arguing his public comments have made clear that he doesn’t have an impartial approach to the issues.
This is a must read from the @BlockchainAssn. Chair Gensler's statements have legal consequences and the Commission should be held to account. https://t.co/LMDuk6YP8S
— Stuart Alderoty (@s_alderoty) June 29, 2023
BlockChain Association Attacks SEC Chair
In a detailed blog post, Chervinsky explained that despite continued requests from the digital assets industry for regulatory clarity, the SEC has refused to adopt any rules or issue any guidance, among many others, for over four years. Instead, the SEC has chosen to regulate digital assets solely through enforcement actions. He wrote,
“In the digital asset space, the SEC has all but abandoned its role as a rulemaking body. Key issues of existential importance to the digital asset industry remain unresolved, chief among them the question of whether and when a digital asset represents a security.”
Furthermore, Chervinsky alleged that every enforcement action initiated by the SEC must follow the “Wells Process”. It is a process that begins with SEC staff sending the notice to the target of the enforcement action telling them what violation they allegedly committed and allowing them to present evidence and arguments in their defense.
1/ SEC Chair Gary Gensler has wrongly prejudged that all digital assets are securities.
As a result, federal law requires that he recuse himself from all enforcement decisions related to digital assets.@MTCoppel and I wrote a paper explaining why 👇https://t.co/xgJ09o4SPS
— Jake Chervinsky (@jchervinsky) June 29, 2023
The primary purpose of the Wells process is to provide the Commissioners with both sides of every case, enabling them to impartially evaluate the situation and make an unbiased determination. However, in the blog post, Chervinsky highlighted the entire process of the Wells Notice has been broken, regarding the digital assets industry. He added,
“Chair Gensler’s vote is tainted: his refusal to engage with the facts and circumstances of each case undermines the Wells process and deprives enforcement targets of the due process rights to which they are entitled.”
SEC Should Be Held Accountable
In response to the tweet, Alderoty chimed in lambasting the American regulatory agency noting there is a conflict of interest among the leadership of the regulator. He argued the SEC’s aggressive policing is effectively killing the industry.
The Ripple legal counsel exec also echoed in the tune that seemed to accuse the SEC under Gensler of hostile regulation by enforcement, aimed at boosting his own political profile. Alderoty tweeted,
“Chair Gensler’s statements have legal consequences and the Commission should be held to account.”
The SEC’s fervent regulatory tightening has sparked a wave of criticism from digital assets firms and advocates for what they describe as regulatory overreach. Yesterday, Coinbase filed a motion urging a New York federal court to dismiss the SEC lawsuit against the company, arguing the American regulatory agency’s claims are inconsistent and go against previous understandings between the two entities.
In its motion, Coinbase argued the SEC has violated their due process rights noting the agency’s regulatory authority has shifted between the previous Chair and current Chair Gary Gensler’s term. In addition, the crypto exchange slammed the regulatory agency’s overreach, stating that the SEC has no jurisdiction over the cryptocurrencies on its exchange platform.
SEC Draws Sharp Criticisms Over Anti-Crypto War
Recently, David Sacks, the tech entrepreneur of Paypal Mafia fame blasted the SEC and Gensler, rather sharply. Commenting on the SEC’s recent legal actions against Coinbase,
Sacks argued that there are no consumer protection issues at stake as there may have been had the commission targeted FTX earlier, citing “what Gensler and the SEC are saying is that it is not legal to operate a crypto exchange in the United States.” Sacks added,
“The scuttlebutt is that [Gensler] has an alliance with Elizabeth Warren, and the rumor is that she will make him Treasury Secretary if he basically destroys crypto in the U.S.”
Not only, industry figures but lawmakers are also denouncing the SEC’s hostile push to block crypto. Earlier this year, US Senator Cynthia Lummis slammed Scott Shay, the former chairman of the now-defunct Signature Bank, for trying to place the blame for the bank’s collapse on digital assets while pocketing millions of dollars in bonuses and stock options.
Furthermore, in May, the United States Chamber of Commerce, which happens to be the largest business organization in the world also blamed the SEC for its “haphazard, enforcement-based approach” to regulating the cryptocurrency industry.
#NEW: Chairman @PatrickMcHenry, Subcommittee Chairman @RepFrenchHill, and all members of the Committee's Republican leadership team sent a comment letter slamming @SECGov's disastrous custody proposal and demanding its withdrawal.
👇 Read more 🔗https://t.co/l9rMtwfJUy pic.twitter.com/4rzG5etjON
— Financial Services GOP (@FinancialCmte) May 11, 2023
In the same month, Patrick McHenry, Chair of the House of Representatives Financial Services Committee, along with six other subcommittee chairs, expressed their dissatisfaction with the SEC’s proposed advisory client custody rule.
