Will The SEC Attack Against Crypto Industry Bring It Closer Together?
Coinbase is the latest company along with Ripple, Uniswap to become under attack by the US Securities and Exchange Commission (SEC). Where is this all going?
When Coinbase CEO Brian Armstrong tweeted on Tuesday night that the SEC threatened to sue if the company ove the upcoming high-yield lending product, Ripple CEO Brad Garlinghouse was fast to respond.
Garlinghouse tweeted a meme from the movie Die Hard with Bruce Willis saying, “Welcome to the party, pal.”
Ripple has been fighting the SEC in court for over a year, and now Coinbase is seemingly becoming a part of the fight, like it or not.
Mark Cuban also had a message for Armstrong: “You have to go on the offensive.” Cuban hasn’t further elaborated how it might look like, but Armstrong is already playing offense publicly with the tone of his tweets. He accused the agency of “intimidation tactics behind closed doors” and said sarcastically:
“It’s nice if you actually enforce evenly across the industry equally.”
What happens next is a big question mark. The flagship companies of the crypto industry are clearly under attack, and they have begun to push back, demanding a fair and consistent set of rules that make it clear what is legal and what is not – and rightfully so.
Ripple’s battle with the SEC is about whether its sale of XRP tokens were unregistered securities offerings. A big question is: why did the SEC wait so long before suing? Ripple has been selling XRP for eight years. And additionally: why does the agency appear to be applying one policy to Ripple and another to Ethereum?
Coinbase, on the other hand, said that it was trying to open dialogue with the SEC to consult how to make its proposed Lend product as secure and safe for investors as possible. According to Armstrong, the agency would not talk to them.
Then there is Uniswap, decentralized exchange and one of the most transparent companies in the fast moving DeFi sector. The SEC has chosen it as a target of investigation, overlooking, as crypto lawyer Jake Chervinsky noted, other “overt frauds,” rug pulls, and pump-and-dumps in DeFi.
Imagine you're a regulator looking at the wide world of crypto.
You see overt frauds pulling rugs; 2017 vaporware ICOs still pushing their tokens; copy/paste DeFi projects pumping & dumping on centralized EVM forks.
You see this & think, "…Uniswap. I'll go after Uniswap." ?
It’s no wonder Armstrong, Garlinghouse, and others have had enough, and concluded it might be better to roll the dice in court rather than continue to try to adhere to the SEC’s current opaque crypto policy and harsh enforcements.
All of this is a surprising turn given that just a few months ago, when new SEC Chair Gary Gensler took the helm, the industry was hailing him as pro-crypto because he taught a course on blockchain at M.I.T. Not only has Gensler so far not been the advocate that crypto people assumed (don’t hold your breath on that U.S. Bitcoin ETF approval), he looks downright hostile. Now the question of what the Gensler regime will do next hangs over all the companies, traders, miners, and investors in crypto.
It becomes guessing game. Perhaps Gensler isn’t the one calling the shots regarding this. Perhaps he is facing pressure from people in the White House and Treasury Department who see crypto as a threat to the U.S. dollar. Or maybe he really believes the SEC is protecting investors (the biggest lie every regulator in the world tells). Many of those same investors are likely cursing him for blocking new ways to earn more than 5% interest on savings accounts rather than the 0.5% or less the banks are paying (the ones the regulators are really protecting).
Whatever the reason for the conflict, crypto’s big companies are in the middle of a dirty fight, and what they do next will likely determine the future of the industry. Battling the federal government is a daunting task, but unlike the infighting of the recent past, big names in crypto are standing together like never before.
That was evident this week when Kraken CEO Jesse Powell, a longtime ideological and commercial rival to Armstrong, came out with strong words of support for Coinbase in a series of tweets. If the likes of Kraken and Coinbase can stand together, they can also form a united front with Uniswap, Ripple, and every other crypto firm under siege from the SEC. Such an alliance could bring the industry together to establish a common legal strategy.
1/ Problem with going ahead now is fines/penalties can be astronomical. Will a judge understand the complex issues and side against the government? Will SEC retaliate? Refusal to discuss merits is just more leverage to force a settlement/shutdown. https://t.co/g2uU1tg43o
But there are no guarantees. Daniel Roberts the Editor-in-chief of Decrypt writes:
“The federal government has killed other emerging industries in the past, including online poker. But given that the SEC now looks openly anti-crypto, the time is right for the leading companies to go full John McClane.”
