Home Crypto How are crypto firms responding to US regulators’ enforcement actions?

How are crypto firms responding to US regulators’ enforcement actions?

by Janine Lindsey

The regulatory landscape for cryptocurrency firms in the United States has been a topic of ongoing discussion and debate. The Securities and Exchange Commission (SEC), under the leadership of Chair Gary Gensler, has faced criticism for its approach to regulating crypto companies and offerings. While major players like Binance, Coinbase, and Ripple have faced civil cases from the SEC, not every company has been subject to the same treatment.

In December 2020, the SEC filed a lawsuit against Ripple, alleging that its XRP token was an unregistered security. However, in July of this year, the company received a partial summary judgment, with the court ruling that the token was largely not a security. Coinbase, which anticipated legal action ahead of the SEC’s lawsuit, targeted the regulator in response, claiming that it had attempted to register without success or proper feedback.

Prometheum, a crypto firm that gained attention after its co-CEO Aaron Kaplan testified before the House Financial Services Committee on digital asset regulation, received approval from the Financial Industry Regulatory Authority (FINRA) as a special purpose broker-dealer (SPBD) for digital asset securities. The firm’s subsidiaries have also successfully registered with the SEC. Kaplan stated that Prometheum was built to comply with federal securities laws, including investor protection rules.

The differing treatment of these companies suggests that some firms may have launched services in the U.S. with the intention of challenging existing regulations. Industry leaders like Brian Armstrong, CEO of Coinbase, have been actively involved in lobbying for legislation favorable to crypto firms. However, there are concerns that existing frameworks do not adequately address digital assets and that determining what qualifies as a security is a challenging task.

Prometheum’s ability to obtain a SPBD license has raised questions and led to calls for an investigation by advocacy groups and members of Congress. Some have raised concerns about potential undue influence and a false narrative being spread about the clarity of the law regarding digital asset securities.

It is uncertain whether Prometheum’s approach will be successful for existing players in the crypto space or for new projects navigating the regulatory challenges in the U.S. The head of the SEC’s crypto enforcement division has stated that the commission will continue to take action against firms it sees as violating securities laws, including decentralized finance projects.

Chair Gary Gensler will be testifying before the U.S. House Financial Services Committee in a hearing on SEC oversight. Lawmakers will question him on various matters, including policies on digital asset custodial activities and the expansion of the commission’s authority over crypto firms.

The regulatory environment for cryptocurrency firms continues to evolve, and the actions and decisions of regulators like the SEC will have a significant impact on the industry. The outcome of ongoing cases and the response of companies and lawmakers will shape the future of crypto regulations in the United States.

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