The SEC’s war on crypto: How far will it go?

Playing a game of whack-a-mole that's What the head of this Securities and Exchange Commission Gary gelsler has Been doing with the crypto industry in The past few months Gemini Kraken paxos Beat tracks these are just a few of the Crypto companies that have been facing The scc's Crackdown for allegedly Violating security laws and now the STC Is after the most experimental but also Potentially disruptive sector of crypto D5 that's right earlier this month Gassler announced that even Decentralized Finance platforms will Help to register with the agency or face Enforcement action so what is wrong with The sec's approach to crypto is gassler Really trying to kill the industry in The U.S and can a system that is by Nature decentralized and uncensorable be Subject to security regulation we'll Answer all these questions in this video But before we start don't forget to Smash the like button and subscribe to Our Channel I'm Giovanni your host and This is a coin Telegraph report [Music] So let's start with some background the SEC or Securities and Exchange Commission is the U.S regulator in Charge of overseeing the Securities Markets its duty is to protect investors Against fraud and Market manipulations Gasser a former MIT Professor has been

Running the agency since 2021. since the Collapse of FTX and other fraudulent Crypto projects last year the SEC has Been at the Forefront of a broad Government Crackdown on crypto Gessler Has said multiple times that the vast Majority of cryptocurrencies with the Exception of Bitcoin are securities and Therefore should be registered as such The problem is that security legislation Dates back decades ago and was not Designed to suit the complexities of an Asset class such as crypto according to The how we test a security is an Investment of money in a common Enterprise with a reasonable expectation Of profits to be derived from the Efforts of others while many crypto Tokens May indeed fall within this Definition others probably don't just Think of stable coins there is no real Expectation of profits from such tokens Since their value remains stable by Design and yet the SEC recently issued a Wealth notice against paxos the issue of Binance USD which had to stop issuing Its Flagship stablecoin another major Source of confusion is whether ether the Second largest crypto should be Considered a security or not asked about This during a congressional hearing last Tuesday Gessler was unable or perhaps Unwilling to give a clear answer I'm Asking you sit in your chair now to make

An assessment under the laws as exists Is either a commodity or a security Without speaking to anyone I know you've Repeatedly said you're not going to Speak to one except you've spoken to one Bitcoin so I'm asking you to speak to a Second one the second largest market cap Here and speaking to the tokens there's 10 to 12 000 if there's a group of Entrepreneurs I'm asking about one that Wasn't very helpful wasn't it that was Typical gangster instead of formulating Specific rules tailored for the crypto Industry he has opted for a regulation By enforcement approach basically that Means going after crypto businesses on a Case-by-case basis hoping to set Precedence that other companies will Fall low This approach is generating a climate of Regulatory uncertainty that risks Stifling crypto innovation But what is the rationale behind this Policy let's see what crypto lawyer J.W Barrett has to say about it the SEC has Extraordinary extensive authority to Extend parties from their rules create Alternative routines exempt from the Traditional rules and designed to meet The needs of the particular type of Investment the leadership just doesn't Like the politics of seeing being seen As adapting to crypto and so they think They're not willing to undergo that

Political cost so they'll let they'll Let the industry suffer and they let the Token holder suffer long story short Gessler seems unwilling to take on the Political risk of entering a Constructive dialogue with the crypto Industry what is even more upsetting Gessler denies that any Crackdown is Actually happening on the contrary he Has said multiple times that the Existing rules are clear enough and There is no need for additional Qualification or a customized set of Rules for the crypto industry just come In and register he says so what's the Problem with that well apparently Registering with the SCC see is easier Said than done according to the sec's Critics the process is extremely Expensive and doesn't fit crypto's Unique aspects in fact the game sources Is a form on our website just go fill it Out is I have to say as a practicing Securities lawyer and a Securities Law Professor That statement by him is I'll be kind misleading is a misleading Description of the registration process Simply put how can a smart contract code Or how can a individual operating a Delegating node comply with those Particular requirements they can the SEC Is Crackdown on crypto reached a new Level last week when Gessler proposed an

Update on existing regulation that would Expand the definition of an exchange The new definition would include any Entity that brings together buyers and Sellers of Securities through structure Methods to negotiate a trade Gansler said explicitly that such a Definition includes decentralized Finance protocols which could also face Penalties for dealing with unregistered Securities so what's wrong with this new Proposal well gassler fails to notice or Perhaps doesn't want to the fundamental Difference between a centralized Exchange such as coinbase and a Decentralized platform such as uni swap Decentralized exchanges do not rely on a Centralized entity to manage trades or Custody people's funds they function on Open code and smart contracts to perform Trades basically no one is in charge of Them so who exactly is supposed to Comply with the SEC again it's unclear But guessler doesn't seem to care Calling yourself a D5 platform is not an Excuse to defy the security laws he said Gassler's latest proposal sparked a wave Of protests among not only crypto Industry leaders but also within the SCC Itself Esther Pierce and SCC Commissioner known for her pro-crypt Abuse has spoken out against gessler's Latest proposal We are uninterested in facilitating

Innovation and competition in the Financial markets and instead seek to Protect incumbents said peers about the Sec's approach More criticism against gelsler emerged In the U.S Congress United States Representative Warren Davidson said he Plans to introduce legislation aimed at Removing gasler from his position at the SEC citing a long series of abuses a Strong argument against the sec's new Proposal on Defy is that it may go Against the U.S Constitution as pointed Out by coin Center crypto activists The Proposal threatens anyone who makes Communication protocols available for Trading purposes that means even Software developers who write and Publish code for daxis should register With the SEC or face prosecution that Amounts to a restriction on Free Speech Which is unconstitutional so how is this SCC ongoing Crackdown on everything Crypto going to play out first of all it Is important to mention the SEC doesn't Have the final word on how crypto should Operate in the US the Judiciary has that Means each one of the sec's enforcement Actions can be challenged in court a Good example is the case of Ripple which For three years has been fighting the SEC in court over whether its native Token xrp should be considered a Security

The outcome of this case will likely set An important precedent for the industry Of course not all companies have the Resources to face a legal battle with The SEC many will just prefer to shut Down and move overseas when it comes to Defy decentralized Protocols are not Based in any specific jurisdiction so it Is difficult if not impossible for the SEC to go after them however despite its Decentralization defy still has some Centralized weak points a large amount Of defy trading relies on centralized Stable coins in particular usdc issued By Circle a company based in the United States that means that in case of Crackdown on usdc the whole defy system Will inevitably suffer to wrap things up The battle between genslers Securities And Exchange Commission and the crypto Industry is likely to continue at least Until New crypto legislation will be Passed by Congress this week crypto Exchange coinbase has sued the s CC Prompting it to provide more clear Guidance Meanwhile the Crackdown on crypto is Already pushing Innovation overseas as Shown in a recent state of crypto report By a16z the US has been steadily losing Ground when it comes to a number of Crypto developers in the country Coinbase recently announced it is Seriously considering leaving the U.S if

More regulatory Clarity won't be Provided on the positive side of things This trend is opening new opportunities For jurisdictions with a more clear Crypto regulation that's all for this Video I hope you enjoyed it I'm Giovanni Your host thank you for watching and see You next time Foreign