The US Securities and Exchange Commission (SEC) has recently increased its enforcement actions against the cryptocurrency industry. Its chairman, Gary Gensler, leads the charge against the nascent asset class.
As the US watchdog tightens its policies against the various cryptocurrency exchange services under its jurisdiction, it has created a wave of concern and fear among investors and customers of exchange platforms.
SEC-crypto divide continues to widen
On February 23, SEC Chairman Gary Gensler stated in a interview with New York Magazine (NYMAG) that “everything but Bitcoin” is a security in U.S. jurisdiction under the Howey test rules.
This follows the ongoing policy against tokens supporting various services for US customers of the exchanges, such as staking services. Bitcoin is the exception, according to Gensler, due to its “unique history and creation story, which is fundamentally different from other cryptographic projects.” The SEC chairman added:
They can throw their tokens abroad at first and argue or pretend it will be six months before they get back to the US. But at heart these tokens are securities because there is a group in the middle and the public is anticipating profits based on that group.
Gabriel Shapiro, General Counsel of Delphi Labs, who has more than a decade of experience in structuring, negotiating and executing strategic transactions for clients in the technology sector, addressed recent statements by the SEC Chairman in a publish on twitter. Shapiro highlighted the importance of the rest of the tokens besides Bitcoin, which have different applications and services in the financial sector.
Shapiro accepted the SEC Chairman’s hypothesis and concluded that with a total crypto market cap of $1.13 trillion made up of 12,306 tokens in the crypto industry, in which Bitcoin accounts for a share of $467 billion, 40 % of the total market cap, 12,305 tokens are allegedly operating illegally in the US as they are publicly traded as “unregistered securities”.
For Shapiro, the SEC failed in its handling of tokens, which he classified in two main ways:
(1) fine + registration requirement – failed every time so far, with companies going bankrupt
(2) fine + order to destroy all pre-mined tokens and remove tokens from all exchanges
both ways tokens 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 structure and the rules of the Howey test would mean 12,305 lawsuits and “wipe out” $663 billion from the market.
Since registration is not “feasible”, according to Shapiro, every token creator must pay hefty fines to register tokens. This could lead to a halt in token development and further exclusion from cryptocurrency exchanges.
Concern over the SEC’s approach to the industry has now affected stablecoins and the services that exchanges provide in US jurisdictions. This could result in capital flight from the American shores. Meanwhile, without a clear regulatory path for investors, questions and uncertainties will continue to pile up in the crypto industry.
The total market cap of the crypto industry is now at $1.02 trillion, representing a -1.39% change over the last 24 hours and a change from -37$ a year ago. As of press time, Bitcoin’s market cap is $450 billion, representing a 40.25% dominance.
On the other hand, the market cap of stablecoins is $136 billion and has a 12.18% share of the global market cap of the crypto ecosystem, according to CoinGecko. data.
Unsplash resource image, TradingView chart.