Criticism of the SEC, along with other regulators, has been more than abundant of late. And there really are reasons for it. For example, their representatives failed to prevent the collapse of giants like the FTX exchange and the Celsius trading platform which led to billions of dollars in losses.

But instead of working through a normal framework for doing business, the regulator has now pounced on adequate projects like Kraken staking and BUSD stabelcoin. And even if the mentioned products have some disadvantages, they are certainly not detrimental to investors, as it was with the same FTX.

With that said, ShapeShift spokesperson and one of the early fans of cryptocurrencies, Eric Voorhees, shared his perception of the Commission’s activities. Here’s his quote from Twitter.

The SEC is like a torn condom. The discomfort is there because of the protection, but the protection is not there.

What are financial regulators being criticised for?

Belsh criticised the US Securities and Exchange Commission for taking action against cryptocurrency companies “trying to do the right thing” – that is, communicate with regulators and find a way to operate in the country. He cited BitGo’s experience when the company approached the SEC in 2018. At the time, its management sought a solution to the issue of asset storage, but the problem was not closed until four years later.

The Commission allegedly made no effort to consider issuing a Bitcoin ETF. Similar trading instruments already exist in the US, but they are based on cryptocurrency futures. The regulator has yet to adopt an ETF based on spot BTC trading, which could encourage more capital inflows to the industry, the expert said.

As a reminder, the Commission's representatives use excessive volatility of cryptocurrencies, i.e. sharp changes in their value, as an argument for its reluctance to approve a spot ETF for Bitcoin. However, such an argument does not seem particularly convincing. Investors know about the ability of digital assets to go up and down in value, but that doesn't stop them.

And if such capital were available, FTX would not have such huge market share and permissiveness, the expert believes. Here’s his rejoinder, cited by Cointelegraph.

It’s worth wondering if we could have avoided the huge amounts of money that flowed into FTX if the main Bitcoin ETF had been submitted and approved by the US Securities and Exchange Commission. There have been more than 25 applications – some from Invesco and other solid firms that have been involved in ETFs for years in the past.


It's worth noting that the activities of FTX management and trading firm Alameda Research would have hurt users of this cryptocurrency exchange in any case. Yet FTX founder Sam Bankman-Fried and his colleagues used customer money for personal use, which resulted in billions of dollars disappearing. Accordingly, the SEC initiative would certainly not have protected investors due to Sam's secretive actions.

However, the regulator is doing the wrong thing one way or another. As Ripple CEO Brad Garlinghouse pointed out the day before, the SEC has yet to provide a mechanism for registering tokens to launch them. Instead, for some reason, officials think it's necessary to fine the Kraken exchange $30 million for supporting the steaming feature for U.S. residents.


Most of the discussion at the meeting was about which federal agencies could regulate certain crypto-assets if Congress passes the necessary legislation. Some Republican representatives seemed particularly critical of the Biden administration’s approach – among them Republican Tom Emmer. Here’s his rejoinder.

President Biden’s policy plan is to illegally abuse the administration to force US crypto firms and their US clients into overseas, unregulated, opaque and insecure markets.

This week also saw the release of the draft US budget for 2024, which proposes a 30 per cent energy tax on US miners. The draft, prepared by the administration of the current president, has drawn criticism even among officials. They believe that such a strategy would simply force cryptocurrency companies to go offshore and would not benefit the country’s economy.


Hong Kong is a case in point here. In this area of China, cryptocurrency ownership and trading will become legal for all residents in the summer of 2023, and as experts believe, Hong Kong in this case serves as a test platform for the legislative framework for the whole country. Therefore, it is possible that cryptocurrencies will be available to Chinese citizens in other regions as well.

With this in mind, many companies are considering the option of moving to Hong Kong. This is especially true given the fines and restrictions on crypto platforms that are being imposed by regulators like the Securities and Exchange Commission in the US.


Others at the meeting were more critical of crypto-assets in general, rather than focusing on guilty individual agencies, political parties or presidential administrations. Representative Brad Sherman, who is also a well-known critic of digital assets, called crypto a “disaster” for the economic system. Lee Reiners, director of policy at Duke University’s Centre for Financial Economics, said that while FTX is one “bad apple”, the entire crypto industry is also “rotten”.

These are generally expected views among politicians. However, what happened in the debate should have the important effect of increasing the government’s pressure on the SEC. The regulator must not be given absolute freedom in controlling crypto, otherwise it would simply “strangle” the industry with bans.


We don't think it's entirely reasonable to blame the regulator specifically for the FTX debacle, as Sam Bachmann-Fried and his colleagues initially acted discreetly. But now the Commission and other bodies should definitely focus on creating adequate regulations rather than going after normal companies like Kraken or Binance. Then the regulator will definitely benefit investors and provide them with more protection in a preventive way.