SEC's Crypto Strategy: A Move to Aid Incumbents

SEC's Strategic Moves Against Crypto

Crypto attorney John E Deaton has highlighted the Securities and Exchange Commission’s (SEC) deliberate strategy against cryptocurrency firms. He asserts that this approach is designed to benefit established incumbents, allowing them to dominate a significant portion of the crypto industry.

The Wells Notice and Its Implications

Deaton pointed out the recent Wells Notice issued to Coinbase by the SEC as part of these strategic tactics. He suggests that this is not an isolated incident, with other leading exchanges like Kraken, Binance, and Binance.US also being targeted. These exchanges have either received or are expected to receive similar notices, signaling a broader campaign by the SEC.

SEC's Warning to Investors

The SEC has cautioned investors regarding firms offering crypto asset securities, emphasizing the need for compliance with U.S. laws. Their recent bulletin advises crypto exchanges to register with the SEC, a state regulator, or a self-regulatory organization, especially if they deal in lending or staking crypto assets.

Impact on the Crypto Industry

Deaton has criticized the SEC’s actions as "scare tactics," suggesting they could harm the crypto industry while benefiting established financial players. This strategy, according to Deaton, involves manipulating regulatory frameworks, such as the 1934 Securities Act, which excludes certain financial assets like digital tokens and software codes.

Understanding the Regulatory Framework

Deaton elaborated on the definition of an "investment contract" and the application of the "Howey test" to crypto assets. He argues that these regulatory measures are being used strategically to control the burgeoning crypto market and facilitate the entry of traditional financial entities.

In conclusion, Deaton’s analysis portrays the SEC’s actions as a calculated move to reshape the crypto landscape, favoring established firms over emerging players.