Restless SEC

    15 Sep 2021

    The US Securities and Exchange Commission is gradually escalating its activity, trying to restrict the cryptocurrency business as much as possible and bring it under the regulatory norms typical for the stock market.

    On August 27, we learned that the US Securities and Exchange Commission (SEC) struck a $ 125,000 deal with AnChain.AI to monitor transactions in the field of decentralized finance (DeFi). In addition, the regulator will pay $ 625,000 for options (five times a year, worth $ 125,000 each).

    The CEO and co-founder of AnChain.AI, Victor Fang, said about the agreement: “The SEC is very interested in understanding what is happening in the world of smart contract-based digital assets”, so the company decided to provide them with tools for “analyzing and tracking smart contracts”.

    AnChain.AI is a San Jose-based artificial intelligence and machine learning startup specializing in tracking illegal transactions on crypto exchanges, in DeFi protocols, and in conventional finance. The deal came about after the SEC turned its eye towards an $ 82 billion DeFi industry.

    The Comission is also concerned about decentralized exchanges like Uniswap, which are getting more and more sophisticated. For example, Fang noted that the Uniswap platform is really a mixture of 30,000 separate smart contracts that conduct an actual token exchange.

    Earlier, on August 5, in a letter to Elizabeth Warren, a famous American Senator, the head of the US Securities and Exchange Commission (SEC) Gary Gensler said that the state does not sufficiently protect cryptocurrency investors, so his department needs additional funds and powers to regulate the cryptosphere. Gensler also mentioned agreeing with the opinion of his predecessor that most cryptocurrencies are unregistered securities.

    What we see here is the case of concept manipulation. After all, who said that the American cryptocurrency buyers even want to receive the same government protection as traditional stock investors? Of course, many people really do. But there are even more of those who understand: cryptocurrencies can and should exist separately from the state. The same goes for DeFi – as soon as the state tries to take decentralized finance under its wing, any attempts by people to get rid of the traditional banks’ dictate will be doomed to failure.

    It is not the first time that SEC head Gary Gensler has announced plans to establish strict control over the cryptocurrency industry under the pretense of protecting investors. According to him, “thousands” of tokens are used as unregistered securities. However, it is worth remembering that so far, all attempts by the Commission to recognize Ripple’s XRP tokens as the aforementioned “unregistered securities” have been in vain. It thus seems premature to talk about “thousands of tokens” …

    Gensler also believes that stimulating the financial industry through cryptocurrencies is possible only under well-thought-out regulation. In early August, he admitted that of the 49 issues listed for consideration by his department, those related to cryptocurrencies are not a priority. However, in the foreseeable future, the SEC is going to examine at least seven crypto-related initiatives: ICOs, cryptocurrency exchanges, lending services, DeFi, stablecoins, custody services, as well as ETFs, and other crypto funds. Which means, essentially, the entire cryptocurrency infrastructure.

    For Gensler, the easiest way to control the cryptosphere is to establish stringent rules for crypto exchanges. He has been at it for some time now: back in early August, the US Securities and Exchange Commission issued a $ 10 million fine to the Poloniex crypto exchange for providing traders with access to unregistered securities. The SEC then claimed that Poloniex engaged in “aggressive advertising” and created conditions for American investors to trade illegal securities.

    The Poloniex management decided not to get involved in a lengthy trial, so the exchange didn’t officially confirm or deny the regulator’s claims. Instead, they agreed to pay “the ransom”: supposedly illegally acquired $ 8.5 million of income, plus another half a million-dollar interest, and a $ 1.5 million fine – $ 10.4 million in total. It’s a pity, of course, that Poloniex agreed to settle. It would be very interesting to make the SEC officially declare all cryptocurrencies “unregistered securities” and then force them to defend this position in court.

    The lesson to learn is that the US Securities and Exchange Commission is willing to oppose the entire cryptocurrency business in the country. However, the United States is a nation where the authorities traditionally consider the business’ perspective. So personally, I would not bet on Gary Gensler’s success in his quest for cryptocurrency regulation.

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