It should be noted that the US Securities and Exchange Commission managed to remind itself in the cryptocurrency world last week. In particular, the regulator filed a lawsuit against Tron and its founder Justin Sun, accusing the latter of creating and distributing unregistered securities represented by TRX and BTT tokens. Naturally, the latter are not recognised as such, but only named in the wording of the case.

The SEC also sent a so-called Wells notice to cryptocurrency exchange Coinbase. It signals the end of the investigation and the regulator’s readiness to file suit. Again, the reason for this is allegedly the offering of unregistered securities represented by the exchange’s steaming platform.

This week another regulator, represented by the Commodity Futures Trading Commission (CFTC), filed a lawsuit against cryptocurrency exchange Binance, which is accused of providing access for US residents to cryptocurrency derivatives. It is important to note that this regulator considers popular cryptocurrencies to be commodities rather than securities.

And while there has been more than enough unpleasant business in recent days, this is clearly not the end. Judging by the rhetoric of SEC Chairman Gary Gensler, he’s happy with what’s happening, well, the regulator will continue to use outdated regulation for the new blockchain industry.

How cryptocurrencies should not be regulated

According to Decrypt’s sources, the head of the US Securities and Exchange Commission testified before the House Appropriations Subcommittee on Financial Services and Government Administration on Wednesday. During his report, he reiterated the view that the vast majority of coins and tokens in the cryptosphere are securities.

The fact that crypto is being equated with securities does not please investors for a reason. Under this condition, the regulator would have the ability to impose strict controls on token issuance, potentially severely delaying the growth and development of the industry. It would also be able to use ex post facto enforcement, meaning it could punish companies for their actions in the past.

Gensler expressed confidence in his agency’s correctness in his response to Congressman Sanford Bishop’s question about the application of securities laws to crypto.

In fact, regulations to regulate cryptocurrencies already exist, sir. They are called “securities regulation”. There are also disclosure rules – when someone is trying to raise money from the public.

In other words, according to Gensler, there is no need to invent anything new, because everything is supposedly already there in the securities regulation laws. This is a strange position, because these laws were developed decades ago, when there were not even the first versions of projects, remotely resembling Bitcoin. Well cryptocurrencies need a brand new set of laws, as such assets have never been seen before in the history of mankind.

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But that’s not all. The US Securities and Exchange Commission is allegedly “hard at work on all fronts”, so the agency badly needs more funding. Earlier, US President Joe Biden announced a request for a record $2.4 billion for the SEC, a request that was fully supported by Gensler.

He also raised the issue of fundraising during his speech to congressmen. Here is the relevant line, as cited by Cointelegraph.

Rapid technological innovations in financial markets have led to misconduct in new areas – not least in the cryptosphere. New tools, expertise and resources are needed to address this problem.

In other words, the scandals surrounding the Commission's proceedings against cryptocurrency projects are being used to obtain additional funding. And it's funny, because in this case, the regulator's staff will be able to make money at the expense of essentially preventing others from making money. This can definitely be said about the recent ban on the cryptocurrency exchange Kraken for US residents.

The new funding will allow the SEC to hire 170 additional staff, most of whom will work in the enforcement and examination departments. The Commission chairman noted that the previous year’s budget increase allowed the staffing levels to be raised higher for the first time than in 2016. However, this is still not enough. Gensler continues.

As ‘police markets’, we need to be able to take tough action against abusers. Which means it makes sense for the SEC to grow with the expansion and increasing complexity of the capital markets.

Gensler also still considers the crypto industry to be the “Wild West” – a field that is overrun with all sorts of fraudsters. Crypto fraud is indeed a problem, but the industry has come a long way in the past few years. Should Gensler be given any funding at all if all he is doing is essentially blocking innovation?

Ripple chief executive Brad Garlinghouse has drawn attention to what’s going on. Here’s a fresh quote from him on Twitter.

The claim by the chairman of the US Securities and Exchange Commission that it is he who determines whether something belongs in securities, not the legislation under which his agency derives its authority, is beyond comprehension. It’s time for elected officials in the US to take notice.


It looks like cryptocurrency companies in the US shouldn't expect any regulatory relief any time soon. SEC executives are clearly happy with their position and with what's happening in general, so the regulator is unlikely to stop there. Accordingly, the only thing left to hope for here is the adequacy of other government officials who will want to stop this cryptocurrency terror.


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