Crypto: Billionaire Mark Cuban warns of a powerful player
The crypto industry is currently going through a crisis that has already crushed some major players such as hedge fund Three Arrows Capital and lenders Celsius Network and Voyager Digital.
After losing over $2 trillion in less than nine months, the cryptocurrency market has more or less stabilized in recent days. But it was also at this time that bad news was issued by the US Securities and Exchange Commission.
The regulator has announced that nine cryptocurrencies have been listed on Coinbase (COIN) – Get Coinbase Global Inc Report exchange, the most popular platform in the US, is unregistered securities.
This decision, which surprised the industry, has important consequences because until now tokens or coins have been considered non-securities. This means that they escape strict supervision from regulators and are not subject to the same rules for financial transparency and disclosure as shares in, for example, a company. The listing process is also less strict than for a security.
The SEC causes an outcry
A security is, according to the SEC, “an investment of money, in a common enterprise, with a reasonable expectation of profit from the efforts of others.”
The announcement came as the SEC and Justice Department filed charges against former Coinbase product manager Ishan Wahi and two others, accusing them of running an insider trading scheme that earned them more than $1.1 million. Wahi allegedly tipped off his brother Nikhil Wahi and his friend, Sameer Ramani, about upcoming token listing announcements on the crypto exchange.
“Prior to these announcements, which typically resulted in an increase in the assets’ prices, Nikhil Wahi and Ramani allegedly purchased at least 25 crypto assets, of which at least nine were securities, and then typically sold them shortly after the announcements for a profit,” the SEC said on 21. July.
The nine tokens in question are: Flexa’s AMP, rally’s RLY, DerivaDEX’s DDX, XY Labs’ XYO, Rari Capital’s RGT, Liechtenstein Cryptoassets Exchange’s LCX, Powers POWR, DFX Finance’s DFX and Kromatika Finances’ KROM.
“Each of the nine companies invited people to invest with the promise that it would use future efforts to improve the value of their investment,” the SEC alleged. The regulator wants to refer to the famous Supreme Court ruling, known as the Howey Test, which considers an asset a security if it meets certain criteria.
The SEC’s decision drew a stream of criticism from the industry, other regulators and lawmakers.
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Coinbase, which could be penalized by the SEC for listing the nine tokens, said in a blog post that it had filed a petition with the SEC to improve the “digital securities regulations” to say how it would apply federal securities laws to crypto-assets. .
“The SEC v. Wahi case is a striking example of ‘regulation by enforcement,'” lamented Commodity Futures Trading Commissioner Caroline Pham in a statement posted on Twitter.
“Do you think this is bad?”
It is in this context that Senator Pat Toomey (R-Pa.) intervened.
“Yesterday’s enforcement action is the perfect example of the SEC taking a clear view on how and why certain tokens are classified as securities,” the lawmaker tweeted. “Yet the SEC failed to disclose their view before initiating an enforcement action.”
“Do you think this is bad?” billionaire and Dallas Mavericks owner Mark Cuban commented. “Wait till you see what they come up with for token registration. It’s the nightmare ahead for the crypto industry. How else do you keep thousands of lawyers employed and create reasons to ask for more taxpayer money? https://youtu.be/9fDiVXpWp1U. “
The star of the Shark Tank TV show followed his post with a YouTube link to a message left for him by the SEC after he called the agency in 2014 to try to find out whether a purchase of a stock he wanted to make would break with insider trading laws. He never got a clear answer. Cuban, in the video, follows the instructions of the SEC employee, but in vain because he does not want an answer to his question and thus exposes himself to a possible penalty for insider trading.
The successful entrepreneur, who has invested in many more crypto projects, wants to prove that the SEC is keeping its rules vague on purpose. This is what the entire crypto industry blames the regulator for.
For five years, the SEC has regulated the crypto industry by enforcing actions, targeting startups that raised money through initial coin offerings. For example, the regulator is in a showdown with Ripple, a blockchain payments firm based in San Francisco. In a court case, the commission considers that XRP, a token associated with Ripple, should be seen as a security, which the firm denies.
Another sign of the tensions: The SEC has previously said it does not consider Bitcoin and Ether, the top two cryptocurrencies by market capitalization, to be securities, but current chairman Gary Gensler still maintains vagueness about Ether.
Gensler told lawmakers last May that Bitcoin is a “commodity token” but has sidestepped questions about Ether.
