Regulators such as the U.S. Securities and Exchange Commission (SEC) are filing civil lawsuits against major cryptocurrency companies such as Binance, Coinbase, and Ripple, but not every company is being treated the same.
Gary Gensler, who has served as SEC chairman since 2021, has been widely criticized by many lawmakers and industry leaders for his “mandatory regulatory” approach to cryptocurrency companies and products. Some cases end up in federal court to determine what might qualify as securities in the United States, but not all judges’ decisions are necessarily favorable to regulators.
The commission filed suit against Ripple in December 2020 over XRP’s alleged unregistered offering, but received a partial summary judgment in July, holding that the token was largely not a security. Coinbase appeared to anticipate legal action ahead of the SEC filing in June and took aim at the regulator in its case, claiming the exchange attempted to “step in and register” but was unsuccessful or did not receive proper feedback.
Prometheum, a cryptocurrency company that gained widespread media attention in June after co-CEO Aaron Kaplan testified before the House Financial Services Committee on digital asset regulation, received approval from the Financial Industry Regulatory Authority (SPBD) to become Special Purpose Broker-Dealer (SPBD) Digital Asset Securities for May. Some of the company’s subsidiaries are also engaged in digital asset business and have successfully registered with the U.S. Securities and Exchange Commission.
“Prometheum’s purpose is to comply with federal securities laws and create the first secure trading platform for digital assets that complies with those laws, including investor protection rules,” Kaplan told Cointelegraph.
Kaplan’s approach appears to indicate that some companies, such as Coinbase, Binance and Ripple, are launching services in the United States in an attempt to change existing regulations. Major players sometimes lobby for legislation that would benefit cryptocurrency companies: Coinbase CEO Brian Armstrong frequently appears in Washington, D.C., and encourages users to support political candidates who support crypto policies.
The Prometheum co-CEO said that certain cryptocurrency companies “have been working hard to rewrite or amend existing laws to benefit them but not retail investors,” speculating that the current framework is unable to handle digital assets. Many industry leaders and lawmakers have expressed similar concerns, claiming that cryptocurrency companies in the United States face an uphill battle in identifying which digital assets qualify as securities.
Four key proposed bills could redefine digital asset regulation. @promethium Still at the forefront, plans to offer regulated digital asset trading and custody. Learn more about cryptocurrency bills on Cointelegraph: https://t.co/vxfdDSxPsu#digitalasset
— Prometheum (@PrometheumInc) July 25, 2023
Kaplan suggested that the fact that Prometheum was able to obtain the SPBD license proved that it could at least comply with regulations. However, the approval led to calls from advocacy groups such as the Blockchain Association and crypto-aware members of Congress to investigate the company.
“We are worried [SEC] Prometheum was granted a “sweetheart” agreement in exchange for support of the committee’s policy goals, or Prometheum is using its personal relationship with the committee to gain an unfair advantage in the market,” the Blockchain Association said in July. “The bottom line Yes, we are concerned that Chairman Gensler is using the Prometheum and SPBD licensing processes as a means to stymie congressional legislative efforts and continue to spread false claims that the law regarding digital asset securities is clear. “
“From the moment Prometheum received its SPBD license, there appeared to be a concerted effort by various industry associations and legislators to discredit the more than six years of hard work we put into building the company.”
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It’s unclear whether Prometheum’s approach would apply to existing players in the field seeking to avoid enforcement action, or to emerging projects aware of U.S. regulatory challenges. David Hirsch, head of the SEC’s cryptocurrency enforcement division, reportedly said at a meeting on September 19 that although the commission is currently involved in several civil lawsuits, it will continue to investigate what it considers violations of U.S. securities laws, including decentralization. Finance) corporate action projects.
Gensler will testify before the U.S. House of Representatives Financial Services Committee’s hearing on SEC oversight on September 27. According to the September 22 memo, lawmakers will question the SEC chairman on issues such as policies on digital asset custody activities and expanding the commission’s powers over cryptocurrency companies.
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