Crypto Under the Eye, Top Lawyer Explains SEC’s Latest Steps

The US Securities and Exchange Commission (SEC) has recently increased its enforcement actions against the cryptocurrency industry. Its chairman, Gary Gensler, is leading the charge against the nascent asset class.

As the US watchdog tightens its policies against the various cryptocurrency exchanges under its jurisdiction, it has created a wave of concern and fear among investors and customers of the exchanges.

The SEC-Crypto Gap Continues to Widen

On February 23, SEC Chairman Gary Gensler declared in a interview with the New York Magazine (NYMAG) that “everything that is not Bitcoin” is a security in the US Jurisdiction under the Howey’s test rules.

This follows the ongoing policy against tokens that support various services for US customers of exchanges, such as staking services. Bitcoin is the exception, according to Gensler, given its “unique history and creation story, which is fundamentally different from other crypto projects.” The SEC chairman added:

They may initially drop their tokens abroad and claim or pretend it will be six months before they return to the US. But in essence these tokens are securities because there is a pool in the middle and the public anticipates earnings based on that group

Gabriel Shapiro, general counsel of Delphi Labs, who has more than a decade of experience structuring, negotiating and executing strategic transactions for clients in the technology sector, addressed recent remarks by the SEC Chairman in a mail On twitter. Shapiro highlighted the importance of the rest of the tokens other than Bitcoin, which have different applications and services in the financial sector.

Shapiro took the SEC Chairman’s hypothesis and concluded that with a total crypto market capitalization of $1.13 trillion, consisting of 12,306 tokens in the crypto industry, in which Bitcoin accounts for a $467 billion slice, the 40% of the total market capitalization, 12,305 tokens are allegedly operating illegally in the US as they are publicly traded as “unregistered securities”.

For Shapiro, the SEC has failed in the way it has handled tokens, which it classified in two main ways:

(1) fine + registration requirement: this failed every time so far, and the companies went bankrupt

(2) fine + order to destroy all premined tokens and remove tokens from all exchanges

either way, chips go to $0

Additionally, Shapiro believes that SEC registration is costly for most token creators, along with an unclear path to token registration. Shapiro believes that this framework and the rules of the Howey test would mean 12,305 lawsuits and “wipe” $663 billion from the market.

Since registration is not “feasible,” according to Shapiro, each token creator must pay heavy fines to register the tokens. This could lead to the cessation of token development and further delisting from crypto exchanges.

Concern over the SEC’s approach to the industry has now affected stablecoins and the services provided by exchanges in US jurisdictions. This may result in capital fleeing the US country’s shores. Meanwhile, without a clear regulatory path for investors, questions and uncertainties will continue to mount in the crypto industry.

Total market capitalization continues its downtrend on the daily chart. Source: TOTAL Trading View

The total market capitalization of the crypto industry now sits at $1.02 trillion, which is a change of -1.39% in the last 24 hours and a change of -37$ a year ago. At press time, Bitcoin’s market cap is $450 billion, representing a 40.25% dominance.

On the other hand, the stablecoin market capitalization is $136 billion and it has a 12.18% share of the global market capitalization of the crypto ecosystem, according to CoinGecko. data.

Featured image from Unsplash, chart from TradingView.

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