Crypto Under the Eye, Top Lawyer Explains SEC’s Latest Move
The US Securities and Exchange Commission (SEC) has recently increased its enforcement efforts against the crypto industry. Its chairman, Gary Gensler, is leading the charge against the nascent asset class.
As the US watchdog tightens its policies against the various services of crypto exchanges under its jurisdiction, it has created a wave of concern and fear among investors and customers of exchange platforms.
The SEC-Crypto Divide Continues to Widen
On February 23, SEC Chairman Gary Gensler stated in a interview with New York Magazine (NYMAG) that “anything but Bitcoin” is a security in the US jurisdiction under Howey test rules.
This follows the ongoing policy against tokens that support various services to US customers of the exchanges, such as betting services. Bitcoin is the exception, according to Gensler, given its “unique history and creation story, which is fundamentally different from other crypto projects.” The SEC chairman added:
They can first release their tokens abroad and claim or pretend that it will take six months before they return to the US. But at their core, these tokens are securities because there is a group in the middle and the public expects profits based on that group.
Gabriel Shapiro, general counsel at Delphi Labs, who has more than a decade of experience structuring, negotiating and executing strategic transactions for clients in the technology sector, addressed the SEC chairman’s recent remarks in a mail on Twitter. Shapiro highlighted the importance of the rest of the tokens other than Bitcoin, which have different applications and services in the financial sector.
Shapiro took the SEC chairman’s hypothesis and concluded that with a total market capitalization of $1.13 trillion, consisting of 12,306 tokens in the crypto industry, of which Bitcoin accounts for a portion of $467 billion, 40% of the total market capitalization, 12,305 tokens allegedly operate illegally in the US given that they are publicly traded as “unregistered securities”.
For Shapiro, the SEC has failed in how it has handled tokens, which he classified in two main ways:
(1) fine + registration requirement – this has failed every time so far, with the companies going bankrupt
(2) fine + order to destroy all premium tokens and remove tokens from all exchanges
either way, tokens go to $0
In addition, Shapiro believes that SEC registration is expensive for most token creators, coupled with an unclear path for token registration. Shapiro believes this framework and the Howey test rules would mean 12,305 lawsuits and “wipe out” $663 billion from the market.
Since registration is not “feasible”, according to Shapiro, each token creator must pay large fines to register tokens. This could lead to the cessation of token development and further delisting from crypto exchanges.
The concern over the SEC’s approach to the industry has now affected stablecoins and services offered by exchanges in US jurisdictions. This could cause capital to flee the shores of the American country. Meanwhile, without a clear regulatory path for investors, questions and uncertainty will continue to accumulate in the crypto industry.
The total market cap of the crypto industry is now at $1.02 Trillion, representing a change of -1.39% in the last 24 hours and a change of -$37 from a year ago. At press time, Bitcoin’s market cap is $450 billion, representing a 40.25% dominance.
On the other hand, stablecoins have a market capitalization of $136 billion and have a share of 12.18% of the global market capitalization of the crypto ecosystem, according to CoinGecko data.
Feature image from Unsplash, chart from TradingView.
