The regulatory institution has consistently taken a negative stance towards cryptocurrencies and has refused to introduce industry-specific regulations. Gary Gensler, who tries to discipline the crypto industry through sanctions, has been criticized multiple times for this approach. He even received a letter from Representatives for prolonging the discussion on the Bitcoin ETF.
SEC’s Criticism of Crypto
Mark Uyeda from the Securities and Exchange Commission (SEC) stated that the institution should consider proposing rules or guidance to regulate cryptocurrencies instead of sanctioning them. The Republican commission member criticizes the SEC for not taking steps to help establish laws for cryptocurrencies.
“Unfortunately, the SEC has not embraced this approach and instead follows a case-by-case approach through enforcement actions. As a result, it will take years to reach any legally binding precedent decision, as these matters will have to go through the courts before reaching the appellate court level.”
The SEC is currently engaged in legal battles with Coinbase and Binance exchanges. On the other hand, a new front is opening in the NFT and DeFi sectors. All of this is due to the SEC’s attempt to apply old rules to the crypto field without creating new ones and subsequently finding platforms guilty. The outdated rules leave it up to the SEC’s perspective to determine whether something is a crime. Indeed, the decisions against the institution support this.
Criticism of the Howey Test
SEC Chairman Gensler frequently refers to the Howey Test, a 1946 US Supreme Court case that includes everything, including orange groves. According to him, this is sufficient to determine whether something is a security. Mark Uyeda also mentioned the Howey test in his evaluation today.
“Determining what is a security can be a difficult analysis not only for market participants but also for courts, which have to analyze the security test defined in a 1946 decision by the US Supreme Court.”
One crucial point is that while market participants have different opinions, courts have different decisions regarding the Howey test. While the sales of UST and LUNA coins are considered securities in one court, another judge in a different court says the opposite for XRP coin sales.
Mark Uyeda finally said the following:
“Determining whether someone’s behavior violates federal securities laws should not be akin to the Sorting Hat in Harry Potter, where a person’s fate is sometimes wrongly predicted depending on which rule or law the SEC plans to apply in an unprecedented manner.”
