John Deaton Criticizes SEC's Crypto Regulatory Approach

SEC's Regulatory Inaction

Crypto lawyer John Deaton has openly criticized the U.S. Securities and Exchange Commission (SEC) for its lack of clear regulatory guidance in the cryptocurrency sector. Deaton, known for advocating on behalf of Ripple and XRP, expressed dissatisfaction with the SEC's contradictory stance on digital asset regulations.

Timeline of SEC Actions

Deaton detailed a timeline of the SEC’s actions, noting significant events and statements that have contributed to the current regulatory confusion. In 2017, the SEC released a report on Decentralized Autonomous Organizations (DAOs), followed by 57 enforcement actions against crypto companies between 2017 and 2019. Notably, the 2018 Hinman Speech and the 2019 digital asset framework have been pivotal in shaping the regulatory landscape.

The Ripple and XRP Dilemma

Deaton emphasized the SEC's missed opportunity to clarify regulations through the Ripple and XRP case. He argued that if Ripple's ownership of 50% of XRP tokens is problematic, a standard should be established to prevent any entity from owning excessive token percentages. This would align with the goal of creating a sufficiently decentralized ecosystem.

Defining XRP as a Currency

Throughout various instances, XRP has been described as a virtual currency. In 2014, the U.S. Government Accountability Office identified XRP within a decentralized payment protocol. In 2015, FinCEN classified XRP as a convertible virtual currency, requiring Ripple to adhere to banking laws rather than securities laws.

Conclusion

Deaton concludes that the SEC has failed to protect investors or maintain efficient markets, as seen in its treatment of XRP. He urges the establishment of a clear regulatory framework for digital assets, even if deemed stringent by industry participants, to foster transparency and stability in the crypto market. This call to action highlights the urgent need for consistent and coherent regulations in the rapidly evolving world of digital currencies.