The SEC Is Quietly Cracking Down on Crypto as the Price of Bitcoin, Ethereum, BNB, XRP, Solana, Cardano, Luna, Shiba Inu and Dogecoin Recover
The crypto rally is alive and kicking.
Over the past week, the price of Bitcoin is up 4.2%, currently trading at $23,800, and the price of Ethereum has jumped 7.9% to just over $1,700. Most of the altcoins are following the suit of the majors. XRP
Meanwhile, the Securities and Exchange Commission (SEC) has rocked the crypto community with another bang. On July 21, the SEC filed charges of insider trading against an ex-product manager of Coinbase and two of his relatives.
“Nikhil Wahi and Ramani reportedly bought at least 25 crypto assets, of which at least nine were securities, and then sold them shortly after the announcements, usually for a profit. The SEC’s press release said That long-running insider trading scheme generated illegal profits totaling more than $1.1 million.
The SEC investigation of America’s largest crypto exchange is itself intense. (Coinbase stock crashed ~20% on the news.) But the sheer semantics of the investigation has a huge conclusion: For the first time ever, the SEC has officially declared a cryptocurrency as a security.
If you’re reading my newsletter, this shouldn’t be as shocking to you.
As I report, last month the Senate introduced the most comprehensive crypto legislation ever aimed at overhauling the way crypto is regulated. Among other things, the bill seeks to classify digital assets into two buckets—commodities and securities—and place them under the regulatory purview of the SEC or the Commodity Futures Trading Commission (CFTC).
“The Responsible Financial Innovation Act Attempts to classify digital assets into securities and commodities and regulate them accordingly. It will “give digital asset companies the ability to determine what their regulatory obligations will be and give regulators the clarity needed to enforce existing securities and commodity trading laws.” For example, bitcoin and ether, which fall into the “commodity” bucket, will be regulated by the Commodity Futures Trading Commission (CFTC), “I wrote at the time.
The SEC’s allegations against Coinbase are an early sign that regulators favor the view that non-autonomous cryptos—those that raise money from the public with the promise of capital gains—are no different from stocks and have to comply with similar laws. .
So, who is it?
Judging by the legalese rhetoric, the strongest competitors to remain as commodities are bitcoin and ether – the most widely autonomous crypto. In fact, in a recent interview, SEC Chairman Gary Gensler chose bitcoin as the only cryptocurrency he and his “predecessors” think deserves the status of a commodity.
“Some people like bitcoin, and I will only say that… as my predecessors and others have said, they are a commodity,” he said.
This is important because having an “official” commodity position opens up a flood of institutional capital. As Michael Sayler, CEO of MicroStrategy
In the opinion of the SEC chairman, the rest of the cryptocurrencies are in the securities bucket. In his recent address, Gensler argued that most cryptos fit the definition of “investment contracts” under the Howe test, which technically subjected them to the Security Exchange Acts of 1933 and 1934.
Will the security label harm crypto? At the end of the day, it’s probably more than a double-edged sword.
On the one hand, it would burden both exchanges and crypto with strict compliance and would bring many smaller players to their knees. On the other hand, crypto “standardization” could open doors to millions of retail investors through traditional investment vehicles such as ETFs.
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