The last week was quite rough for the SEC as a number of industry figures and officials openly criticized the regulator. May 8 was deemed to be the deadline for the SEC’s proposed custodial rule, but it did not receive any favorable feedback. Many influential individuals throughout the market claimed that the entirety of the proposal was a misleading and transparent attempt of waging war on cryptocurrencies.
The Blockchain Association argued that the custodial rule of the SEC exceeds its authority, and would inevitably leave the assets of the users open to increased risks. However, a similar statement was made by the chair of the United States House of Representatives Financial Services Committee, Patrick McHenry.
SEC Faces Constant Backlash
Another reason to openly criticize the SEC revolved around its legal threat to Coinbase, accusing the firm of violating securities law. The exchange, backed up by the US Chamber of Commerce, filed a complaint with the SEC just last week.
The Chamber of Commerce accused the SEC of deliberately creating an uncertain landscape for crypto firms throughout the country. At the same time, Paradigm followed similar footsteps by filing an amicus brief. Crypto firms currently believe that the lack of proper regulatory clarity by the SEC would result in a de facto ban on digital asset trading platforms.
Currently, EMPOWR filed a suit against the regulatory body in an effort to force it to comply with a Freedom of Information Act request. EMPOWR claims that SEC officials always had a possible conflict of interest regarding cryptocurrencies.
Gary Gensler Claps Back on Critics
Based on the accusations, and the recent filing by Coinbase, the chair of the SEC, Gary Gensler, has clapped back and has argued that the regulator has provided adequate clarity regarding crypto regulation.
In a keynote speech, Gensler was questioned about the dispute of the SEC with Coinbase, the rules surrounding crypto, and why the SEC does not establish proper rules for the crypto market. Gensler responded by saying that the necessary rules had already been established.
Similarly, he also stated:
“To make it quite direct: this is a field that has been operating largely non-compliant. There’s nothing about a new technology that makes it non-consistent with the public policies that Congress has laid out.”
Gensler also highlighted how the SEC has already put rules for what is required to custody assets, be an exchange, broker-dealer, or advisor, and also how to register securities offerings with the regulatory body. The chair of the regulatory body currently believes that all digital assets, apart from Bitcoin, fall under the securities definition of an investment contract.