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SEC Criticized for How It Regulates Crypto — Chair Gensler Says Most Crypto Tokens ‘Have Attributes of Securities’

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The US Securities and Exchange Commission (SEC) has been heavily criticized for its approach to regulating the crypto sector. The criticism follows the actions of the securities regulator against a former Coinbase employee in an insider trading case in which the SEC named nine crypto tokens listed on Coinbase as securities.

The SEC has been criticized for being regulated by law enforcement

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The US Securities and Exchange Commission (SEC) has been heavily criticized for taking a coercive approach to regulating the crypto sector after the regulator charged a former Coinbase employee in an insider trading case. In its complaint, the SEC stated that nine crypto tokens listed on Coinbase are securities, which was immediately disputed by the Nasdaq-listed cryptocurrency exchange.

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Commodity Futures Trading Commission (CFTC) Commissioner Caroline D. Pham published statement about the case Thursday. She wrote:

The SEC v. Wahi case is a prime example of “regulation through enforcement.”

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“The SEC complaint alleges that dozens of digital assets, including those that can be described as utility tokens and/or certain decentralized autonomous organization (DAO) tokens, are securities,” she said.

Former CFTC commissioner Brian Quintenz agreed with Pham, tweeting:

Regulation through coercion, threats, pressure, PR, or any other means outside of the APA’s rulemaking process is completely inappropriate. Is always.

The Administrative Procedure Act (APA) applies to all agencies of the federal
government. It provides general procedures for various types of rulemaking.

Quintenz said last August that “the SEC has no authority over pure commodities or where they trade, whether it be wheat, gold, oil…. or crypto assets.

US Senator Pat Toomey (R-PA) also shared his views on the SEC v. Wahi case. On Friday, he tweeted: “Yesterday’s enforcement action is a perfect example that the SEC has a clear view on how and why certain tokens are classified as securities. However, the SEC did not disclose its views before taking enforcement action.”

SEC Chairman Gary Gensler shared his views on cryptocurrency regulation in an interview with CNBC on Thursday. “I am neutral on technology, but not on investor protection. This is a very speculative asset class,” he stressed, adding:

There are thousands of tokens, most of which have the attributes of securities.

Gensler warned: “As with any field of venture capital and new projects, many projects fail. You look at the statistics, in fact, most new ventures fail, and it is important that the public receive disclosure, understand the risk. There is a very significant risk in this area.”

Last week, US Congressman Tom Emmer also criticized the SEC for “pursuing companies outside of its jurisdiction.” He stated, “Under Chairman Gensler, the SEC has become a power-hungry regulator, politicizing law enforcement by forcing companies to ‘come and talk’ with the Commission and then enforcing them to prevent good faith cooperation.”

What do you think about how the SEC regulates the crypto sector? Let us know in the comments below.

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