The SEC war on crypto has begun

GB Market Commentary 13/02/2023

by Marcus Sotiriou

Bitcoin is currently testing $21,500, a key support level, whilst US regulators hone in on crypto firms. The SEC is suing Paxos, the issuer of BUSD, and has labelled BUSD as an “unregistered security”.

Paxos has been ordered by the New York Department of Financial Services (who regulate Paxos) to stop issuing BUSD.

Binance CEO, CZ, has announced that they will continue to support Binance USD, but they “foresee users migrating to other stablecoins over time,” and they will “make product adjustments accordingly. eg, move away from using BUSD as the main pair for trading, etc.”

Currently, BUSD has a market cap of around $16 billion but CZ claims, “as a result of the NYDFS enforcement action, its market cap will only decrease over time.”

The actions of the SEC appear to be way off the mark. They have labelled BUSD a security, yet hard pegged stablecoins have no expectation of profit and have a fixed price, like stored value Gift Cards.

The SEC took action against Kraken last week too, as they announced a settlement with Kraken agreeing to stop offering staking as a service, and pay a $30 million fine. However, none of the money will go to restitution because there aren't any actual victims.

Regulation by enforcement is puzzling for crypto enthusiasts. The SEC claim that “all crypto projects have to do is come in and register,” yet when they do, they are just told “no”. People are desperately trying to figure out how to offer a product legally whilst getting zero guidance.

A new study on crypto-related lawsuits since 2018 shows a 42% increase in crypto lawsuits in the US in 2022, but it seems that the SEC war on crypto is only just getting started. The US runs the risk of shunning crypto activity offshore as they get left behind.

Could this be an opportunity for other governments like the UK to capitalise on?

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