Former Securities and Exchange Commission (SEC) official slams “cryptocurrency lobbyists” for calling SEC enforcement action “regulation by enforcement,” calling the term a “bogus big crypto catchphrase.” .
John Reid Stark, former chief of the SEC’s Internet Enforcement Office and crypto skeptic, commented A Jan. 22 post said the debate was “horribly misguided” just how securities regulation worked.
“Litigation and SEC enforcement is how securities regulation really works,” he argued. “The flexibility of the SEC statutory arsenal is a hallmark of the SEC and allows SEC enforcement to curb fraud.”
“In fact, the repeated chorus of RBE is [regulation by enforcement] Not only is it a misguided and biased effort designed to capitalize on sympathetic libertarian and anti-regulatory conventions, it is also sheer nonsense. “
According to Stark, when the SEC’s Internet Enforcement Office was created in 1998, critics said the SEC’s regulations were too vague and enforcement regulations would stifle the growth of the Internet.
“In hindsight, relying on the flexibility of securities regulation to police the internet wiped out the more egregious cases of early online securities fraud,” he argued.
“Furthermore, the SEC’s aggressive enforcement efforts online pave the way for legitimate innovation to thrive, making markets more efficient and transparent, thereby providing more opportunities for investors to succeed. ,” he said.
in the last few years SEC launched several high-profile incidents against Crypto companies like Ripple and LBRY have prompted some critics to argue that the SEC uses enforcement actions to formulate laws on a case-by-case basis rather than creating clear regulations.
Regulation by enforcement has terrifying effects, and there is also the matter of rhetoric. We have already seen a huge amount of cryptocurrency talent, asset issuers and startups go offshore.
— Brian Armstrong (@brian_armstrong) September 20, 2022
Ripple Legal Counsel Stuart Alderoty also questioned this approach in a post on Nov. 28, attracting attention Collapse of FTX and related Contagion that claimed BlockFi Evidence that doesn’t work.
Another SEC “Regulation by Enforcement” success story.
A few months after the $100M BlockFi/SEC deal, BlockFi trades at b/cy. $275 million loan balance from BlockFi to FTX. Unknown amount of money from FTX to BlockFi. Nothing registered. did you pay the fine? whose money? Consumers have plummeted. https://t.co/XWflfRDIMk
— Stuart Alderoty (@s_alderoty) November 28, 2022
However, in Stark’s opinion, the SEC follows the law in its actions. Cited legal wins If the court finds it favorable.
“In fact, the courts have upheld a wide range of SEC lawsuits involving cryptocurrency-related offerings. In fact, out of the 127 crypto-related enforcement actions already filed by the SEC, the SEC has lost none. No,” said Stark.
“The SEC’s approach is seldom inappropriately broadened, nor does it involve fraudulent SEC enforcement efforts.”
“Rather, the SEC typically adopts a rational, common sense application of the fundamental requirements of federal securities laws to new and evolving market conditions and technologies,” he added.
Timothy Cradle Former employee of Celsius The Blockchain Intelligence Group’s current director of regulatory affairs responded to Stark’s post, questioning whether explicit regulation would ultimately be a better policy than regulation by coercion.
“I agree with the contention, but is it overkill to ask the SEC and CFTC to issue guidance like FinCEN did in 2019?” he said.
“If Big Crypto says it needs clear rules, it makes sense for regulators to make it clear in their official communications, such as guidance, that their rules apply to cryptocurrencies. Is it?” Cradle added.
Related: CFTC accused of ‘blatant regulation by coercion’ over Oki DAO case
Chris Hayes, former Advisory Board Member of PA [Pennsylvania] The Blockchain Coalition also commented, “A prudent regulatory approach would be for the SEC to issue a request for comment on how digital assets cannot meet their registration obligations due to their digital nature on the blockchain. It would,” he claimed.
“Having that information and taking into account the technical differences that affect custody, secondary sale, settlement times/structures compared to traditional securities, how these tokens will operate under 33 law. I will propose a rule to which you can comply.”
