- The U.S. Securities and Exchange Commission (SEC) has consistently targeted crypto companies dealing with “crypto asset securities.”
- However, the SEC now intriguingly claims that it never intended to assert that these tokens are indeed securities.
- A notable statement was made in a footnote of the agency’s amended complaint against Binance, clarifying the use of the term “crypto asset securities.”
SEC Clarifies Its Stance on Crypto Asset Securities in the Binance Case.
SEC Attempts to Clarify “Crypto Asset Securities” Term in Binance Lawsuit
In a surprising turn, the SEC stated in its amended complaint against Binance that when referring to “crypto asset securities,” it does not mean the crypto asset itself but rather the collective set of contracts, expectations, and understandings of those assets’ sales. The term is merely a “shorthand,” the SEC explained, and the agency had always maintained this perspective. The SEC pointed to a supplement text in its case against Telegram as evidence. To alleviate any confusion, the SEC committed to avoiding this shorthand in its ongoing case against Binance.
Industry Reaction to SEC’s Clarification
Industry experts had mixed reactions to the SEC’s recent clarification. Variant Fund Chief Legal Officer Jake Chervinsky expressed disbelief on X, remarking that such a level of gaslighting was unfathomable. On another front, Paul Grewal, Chief Legal Officer at Coinbase, reminded everyone that the SEC had referred to XRP as a “digital asset security” in its complaint against Ripple. Ripple’s Chief Legal Officer Stuart Alderoty criticized the SEC further, suggesting the agency should admit its contradictory positions openly.
SEC’s Regulatory Actions Against Binance and Other Firms
The SEC’s lawsuit against Binance involves multiple allegations of securities law violations in the United States. The agency submitted an omnibus opposition in November 2023, claiming that ten third-party crypto asset securities were marketed as investment contracts on Binance’s platforms. These claims adhere to the “Howey Test,” which helps define investment contracts within securities. In July 2024, the SEC revealed plans to amend its complaint against Binance, aiming to simplify the legal issues around the allegations regarding specific tokens.
Recent SEC Settlements in the Crypto Industry
This proposed amendment follows a series of enforcement actions by the SEC over recent weeks. Notably, the agency recently settled with financial services firm eToro over charges that it operated as a broker and clearing agency unlawfully in connection with its crypto business. Additionally, the SEC charged and settled with Galois Capital, a crypto-focused investment advisory firm, over issues concerning the handling of client assets. Noteworthy is that the term “crypto asset securities” also appeared in the orders related to these settlements.
Criticism of Gary Gensler’s Regulatory Approach
SEC Chair Gary Gensler’s regulatory strategy has been met with criticism from leaders in the crypto space. Gensler maintains that most cryptocurrencies qualify as securities and urges crypto platforms to register with the SEC. However, many crypto companies argue that it is not feasible to register under the current regulatory framework, which they find inadequate for properly overseeing digital assets.
Conclusion
In summary, the SEC’s attempt to clarify its stance on “crypto asset securities” has stirred significant discourse within the industry. With ongoing regulatory actions against key players like Binance, and given the agency’s recent settlements, the crypto landscape remains as challenging as ever. Moving forward, the community will closely watch how these clarifications and regulatory updates evolve, shaping the future of cryptocurrency regulation in the U.S.
