<p class="is-style-lead">The U.S. Securities and Exchange Commission (SEC) is yet to issue straightforward steps to clear out the ongoing frenzy about cryptocurrency regulation. The regulatory body appears to be “taking its time” to establish clearer laws, with many enthusiasts expressing concern that rulemaking could take years.&nbsp;</p>



<p>Gary Gensler, the SEC chair, is at the center of the uncertainty dubbed “providing clear guidelines to regulate crypto.” He has spoken his mind several times, articulating viewpoints criticized by the crypto community. The current confusion raises the question, are the SEC and its chairs seriously considering proposing definitive laws in the future?</p>



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true"><p lang="en" dir="ltr">SEC: Come in and register.<br>CB: We’d like to register.<br>SEC: You’re not allowed.<br>CB: Why not?<br>SEC: The rules are clear.<br>CB: The rules don’t make sense.<br>SEC: The rules are the rules.<br>CB: Can they be adapted?<br>SEC: Yes, but we don’t like your industry.<br>CB: But you&#39;ve adapted rules…</p>&mdash; miles jennings | milesjennings.eth (@milesjennings) <a href="https://twitter.com/milesjennings/status/1658515975170555904?ref_src=twsrc%5Etfw" target="_blank" rel="noopener">May 16, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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<h2 class="wp-block-heading" id="coinbase-asks-for-new-digital-asset-rules">Coinbase asks for new digital asset rules</h2>



<p>On April 24, Coinbase <a href="https://crypto.news/court-ruling-favors-coinbase-in-legal-battle-with-sec-over-crypto-regulations/" target="_blank" rel="noreferrer noopener">filed</a> a lawsuit asking the SEC to respond definitively to the exchange’s petition for new digital asset rules establishment. On May 16, the SEC <a href="https://storage.courtlistener.com/recap/gov.uscourts.ca3.119939/gov.uscourts.ca3.119939.26.0_1.pdf" target="_blank" data-type="URL" data-id="https://storage.courtlistener.com/recap/gov.uscourts.ca3.119939/gov.uscourts.ca3.119939.26.0_1.pdf" rel="noreferrer noopener">formally responded</a> that rulemaking could take years. </p>



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<p>Further, they emphasized that enforcement actions will not stop. The regulator argued that it faced no obligation to meet the Coinbase requirements in its petition, saying that the reforms were complex and could not be achieved quickly. Hence, they called for Coinbase’s petition to be denied.</p>



<p>Paul Grewal, the Coinbase Chief Legal Officer, responded to the regulator on Twitter, saying the filing might be the first time the SEC gave views on creating rules for the crypto industry. </p>



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<blockquote class="twitter-tweet" data-width="550" data-dnt="true"><p lang="en" dir="ltr">The SEC acknowledged that it will continue to use enforcement actions as a substitute for rulemaking for the foreseeable future, but not to worry — those enforcement actions may eventually “inform” not-yet-planned rulemaking. 4/7</p>&mdash; paulgrewal.eth (@iampaulgrewal) <a href="https://twitter.com/iampaulgrewal/status/1658271342863716352?ref_src=twsrc%5Etfw" target="_blank" rel="noopener">May 16, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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<p>Grewal further argued that the response reinforced the industry&#8217;s demand for more clarity on digital asset rules. He added that what the SEC considers to be within or without their jurisdiction still needs to be clarified and could continue changing its mind with time.</p>



<p>Grewal highlighted that the SEC said public statements by Gensler should not be considered formal guidance from the SEC, and the public should not rely on them.</p>



<h2 class="wp-block-heading" id="gensler-criticized-for-crypto-regulation-approach">Gensler criticized for crypto regulation approach</h2>



<p>In February 2023, Gary Gensler, the SEC Chair, <a href="https://nymag.com/intelligencer/2023/02/gary-gensler-on-meeting-with-sbf-and-his-crypto-crackdown.html" target="_blank" data-type="URL" data-id="https://nymag.com/intelligencer/2023/02/gary-gensler-on-meeting-with-sbf-and-his-crypto-crackdown.html" rel="noreferrer noopener">suggested</a> that all cryptos apart from bitcoin were securities. However, as many crypto lawyers pointed out, Gensler does not determine the law and its application. His input does matter, but the court is mandated to determine the law.</p>



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true"><p lang="en" dir="ltr">Friendly reminder that Gensler’s opinions on what is or isn’t a security are not legally dispositive. <br><br>In this country, judges &#8211; not SEC chairs &#8211; ultimately determine what the law means and how it applies.<br><br>Doesn’t mean his thoughts are irrelevant. They’re just not dispositive.</p>&mdash; Logan Bolinger (@TheWhyOfFI) <a href="https://twitter.com/TheWhyOfFI/status/1629649343627116545?ref_src=twsrc%5Etfw" target="_blank" rel="noopener">February 26, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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<p>On April 18, during a Financial Services Committee hearing, Gensler <a href="https://emmer.house.gov/2023/4/emmer-sec-chair-gensler-is-an-incompetent-cop-on-the-beat" data-type="URL" data-id="https://emmer.house.gov/2023/4/emmer-sec-chair-gensler-is-an-incompetent-cop-on-the-beat" target="_blank" rel="noreferrer noopener">was questioned</a> by Majority Whip Tom Emmer (MN-06) regarding the SEC regulation-by-enforcement agenda. According to Emmer, Gensler is &#8220;incompetent&#8221; and was inappropriately regulating the crypto industry by making public statements.&nbsp;</p>



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<blockquote class="twitter-tweet" data-width="550" data-dnt="true"><p lang="en" dir="ltr">.<a href="https://twitter.com/GaryGensler?ref_src=twsrc%5Etfw" target="_blank" rel="noopener">@GaryGensler</a> is an incompetent “cop on the beat.”<br><br>He’s actively putting everyday Americans in harm’s way and pushing American firms into the hands of the Chinese Communist Party👇</p>&mdash; Tom Emmer (@GOPMajorityWhip) <a href="https://twitter.com/GOPMajorityWhip/status/1648375135596953601?ref_src=twsrc%5Etfw" target="_blank" rel="noopener">April 18, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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<p>Emmer added that the SEC chair often contradicts himself, bringing more chaos to the crypto space. As a result, crypto firms were moving abroad due to the hostile regulatory environment.&nbsp;</p>



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<p>In his <a href="https://www.sec.gov/news/testimony/gensler-testimony-house-financial-services-041823" data-type="URL" data-id="https://www.sec.gov/news/testimony/gensler-testimony-house-financial-services-041823" target="_blank" rel="noreferrer noopener">testimony</a>, Gensler highlighted that the goal is &#8220;to protect our &#8216;clients&#8217;: U.S. investors.&#8221;</p>



<h2 class="wp-block-heading" id="xrp-case-what-is-security-and-what-isn-t">XRP case: what is security and what isn’t?</h2>



<p>The Ripple v. SEC case may become a landmark event in the history of cryptocurrency regulation. It started in December 2020 when the SEC <a href="https://www.sec.gov/news/press-release/2020-338" data-type="URL" data-id="https://www.sec.gov/news/press-release/2020-338" target="_blank" rel="noreferrer noopener">filed a lawsuit</a> against Ripple for selling XRP, saying that it was an unregistered security and not a commodity. In addition, it was accused of illegally raising $1.8 billion from selling the token.&nbsp;</p>



<p>As the case entered its third year, both opponents tried to identify weaknesses in each other’s argument. On May 13, Stuart Alderoty, the chief legal officer at Ripple, criticized the SEC for their attempt to misinterpret the Howey test, specifically on “common enterprise.”&nbsp;</p>



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true"><p lang="en" dir="ltr">In 1946, in its Sup Ct “Howey” brief, the SEC unsuccessfully argued that an investment in a “common enterprise” was unnecessary provided there was a “community of interest”. The SEC was wrong then and it is still wrong now. Common Interest ≠ Common Enterprise. <a href="https://t.co/RvH50b6Yjv" target="_blank">pic.twitter.com/RvH50b6Yjv</a></p>&mdash; Stuart Alderoty (@s_alderoty) <a href="https://twitter.com/s_alderoty/status/1657452465938202626?ref_src=twsrc%5Etfw" target="_blank" rel="noopener">May 13, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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<p>The regulator had argued that the XRP fungibility acted as common enterprise evidence. However, Alderoty highlighted a difference between “common enterprise” and “community of interest.” Hence, the SEC lost the argument, Alderoty said. </p>



<h2 class="wp-block-heading" id="lbry-accuses-sec-of-double-standards">LBRY accuses SEC of double standards</h2>



<p>In May 2023, the SEC decided to <a href="https://crypto.news/sec-revises-22m-penalty-against-lbry-proposes-111k-instead/" target="_blank" rel="noreferrer noopener">revise</a> the penalty imposed on LBRY, a crypto startup, citing financial difficulties. In November 2022, the SEC issued a $22 million penalty saying LBRY violated the regulator’s laws in selling LBC, its cryptocurrency. Later, they revised it to $111,614.&nbsp;</p>



<p>LBRY, on the SEC <a href="https://crypto.news/sec-wins-lbry-loses-as-lbc-token-ruled-as-a-security/" target="_blank" rel="noreferrer noopener">decision</a>, accused it of a <a href="https://twitter.com/LBRYcom/status/1658494927695650817" data-type="URL" data-id="https://twitter.com/LBRYcom/status/1658494927695650817" target="_blank" rel="noreferrer noopener">dual narrative</a>. </p>



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<blockquote class="twitter-tweet" data-width="550" data-dnt="true"><p lang="en" dir="ltr">The SEC repeatedly cited a single sentence from an unpaid volunteer moderator in our community chat as evidence that LBC was a security.<br><br>Meanwhile, the SEC argues in Coinbase filing that even statements from senior staff of the SEC about securities law don&#39;t mean anything.</p>&mdash; LBRY 🚀 (@LBRYcom) <a href="https://twitter.com/LBRYcom/status/1658494927695650817?ref_src=twsrc%5Etfw" target="_blank" rel="noopener">May 16, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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<p>From a broader perspective, the LBRY challenge shows the general lack of a clear regulatory framework for digital assets, which is a challenge for the crypto industry.</p>



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<h2 class="wp-block-heading" id="further-confusion-on-the-bittrex-case">Further confusion on the Bittrex case</h2>



<p>On April 18, the SEC categorized six cryptos as securities during the Bittrex crypto exchange lawsuit. The lawsuit argued that the exchange did not register with the regulator as an exchange, clearing agency, or broker-dealer, a requirement under the Securities Exchange Act of 1934.</p>



<p>For the lawsuit to proceed, the SEC must establish that at least one of the exchange&#8217;s tokens was security. Hence, they <a href="https://crypto.news/sec-charges-bittrex-for-securities-laws-violation/" target="_blank" rel="noreferrer noopener">labelled</a> Dash (DASH), OMG Network (OMG), Monolith (TKN), Algorand (ALGO), Real Estate Protocol (IHT), and Naga (NGC) among the “non-exhaustive list” of crypto asset securities.&nbsp;</p>



<p>Despite the SEC statement, none of the mentioned tokens have been issued with charges at the time of writing. Lawrence Law counsel J.W. Verret <a href="https://decrypt.co/136990/sec-bittrex-lawsuit-algorand-five-tokens-securities" target="_blank" rel="noreferrer noopener">highlighted</a> that the claims made by SEC would not survive a challenge in court, and the parties would settle. According to Verret, a final answer would not be given and that is why the SEC is making aggressive claims.&nbsp;</p>



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<p>Earlier in March, Bittrex announced that it would&nbsp;<a href="https://crypto.news/bittrex-to-shut-down-us-operations-cites-regulatory-challenges/">shut down operations</a>&nbsp;in the US by April 30, 2023, because of regulatory uncertainty.&nbsp;</p>



<p>In June 2023, House Republicans <a href="https://crypto.news/sec-and-cftc-find-clarity-in-new-legislation-to-regulate-crypto/" data-type="URL" data-id="https://crypto.news/sec-and-cftc-find-clarity-in-new-legislation-to-regulate-crypto/" target="_blank" rel="noreferrer noopener">introduced</a> a draft proposal to bridge the current crypto regulatory framework gaps. </p>



<p>As seen in the European Union&#8217;s <a href="https://crypto.news/eu-finance-ministers-green-light-mica-crypto-regulation/" data-type="URL" data-id="https://crypto.news/eu-finance-ministers-green-light-mica-crypto-regulation/" target="_blank" rel="noreferrer noopener">proactive approach</a> to crypto regulations, there&#8217;s an urgent need to establish straightforward rules that safeguard investors and foster innovation and growth in the crypto market.</p>



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The SEC and crypto regulation: Why the delay in rulemaking?

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