SEC enforcement actions

You are likely aware of the recent enforcement actions by the U.S. Securities and Exchange Commission against Binance U.S. and Coinbase. These actions state the exchanges have been selling Securities and are not licensed to do so. Examples of Securities as stated by the SEC include ADA along with a number of other leading cryptocurrencies.

IOG strongly dispute the characterisation of ADA and have responded on their blog:

The filing contains numerous factual inaccuracies and will not impact IOG’s operations in any way. Under no circumstances is ADA a security under U.S. securities laws. It never has been. Understanding how decentralized blockchains operate is a fundamental component in creating responsible legislation. IOG continues to welcome cross-industry collaborations with regulators to help develop frameworks, which not only safeguard consumers, but do not stifle innovation within the communities building decentralized protocols. This latest filing from the SEC demonstrates that we still have a long way to go in this regard. Regulation through enforcement action does not provide either the clarity or certainty to which both the blockchain industry and consumers are entitled.

There are a lot of theories around why this is happening now, after all the SEC approved Coinbase to list on Nasdaq in 2019, so you might think they would have considered the business model at that time?

A number of commentators have also noted that the SEC do not mention ETH in the enforcement actions but do mention ADA and even relatively smaller players such as COTI. While there may be reasons for this which are not yet clear, it seems a little strange given ADA (unlike ETH), was offered for sale in a country where it met the regulations for an Initial Coin Offering and in a manner which allowed a fair public acquisition of the token and compliance with all laws.

Our view is that this has a long way to play out yet. The SEC action against Ripple is still running after a number of years with no indication when it will conclude (although the Hinman emails are due to be unsealed soon). Coinbase have also repeatedly asked the SEC for clarity prior to this action.

Crypto represents an opportunity for self-sovereignty of identity, banking, financial services and money which challenges existing markets and entrenched players. We should expect the path to be arduous and complex in places.

If we want to be taken seriously as an industry and earn our place at the table responsible regulation in all major markets should be the next goal. Europe is already heading in this direction with the work on the Markets In Crypto Assets (MICA) regulation. It would be good to see the U.S. taking a similar path.