(New York) The American financial markets authority, the SEC, on Tuesday sued the first cryptocurrency exchange in the United States, Coinbase, for non-compliance with regulations, causing the fall of its action on Wall Street and another jolt for the sector.
This is an additional blow to this sector by the Securities and Exchange Commission which, failing to see Congress define a legislative framework, has taken control of the regulation of cryptocurrencies, which it considers to be under its authority.
This repressive offensive strikes a universe already weakened by a series of resounding failures last year, first of all that of the second largest platform in the world, FTX, whose leaders are accused of having used their clients’ assets without their knowledge.
On Tuesday, Coinbase stock lost more than 12% on Wall Street.
The market policeman criticizes Coinbase for not having registered with him as an exchange platform and intermediary for cryptocurrency transactions.
“The SEC’s strategy of relying on a law enforcement-only approach in the absence of clear rules for the digital asset industry is having a negative effect on the economic competitiveness of the United States and companies like Coinbase that have made the proof of their commitment to compliance,” commented Coinbase chief legal officer Paul Grewal in a reaction sent to AFP.
“The solution requires legislation that defines fair rules, implemented transparently and applied fairly, not through the courts,” he said. “In the meantime, we will continue to operate in the same way,” he added.
The announcement of this lawsuit in federal court in Manhattan comes the day after the SEC subpoenaed the world’s leading crypto-asset exchange, Binance, for knowingly circumventing regulations to deal with American customers.
“For the cryptocurrency community as a whole, legal actions against two of the largest, most well-known companies will impact consumer confidence in cryptocurrencies, which was already weakened,” said Douglas Clark, Insider Intelligence analyst.
By the end of 2022, Coinbase had 110 million users and US$80 billion in assets housed on its platform.
” Far west ”
Coinbase’s subpoena comes as a hearing on cryptocurrency regulation takes place on Tuesday before the House Agriculture Committee, whose interest in financial markets dates back to agricultural commodity derivatives .
Among the personalities interviewed is Coinbase’s chief legal officer, Paul Grewal.
“The United States is falling behind” other countries with more mature legislation, argued the lawyer in an opening statement, and “pushing technology and innovators abroad due to a lack of rules clear for cryptocurrencies”.
The United States “has a bigger place (the size of its national market) in the financial markets because it has earned the public’s trust. […] Cryptocurrency markets are eroding that trust,” SEC Chairman Gary Gensler said in an interview with CNBC on Tuesday.
The cryptocurrency industry “resembles the Wild West, with a culture of ‘not seen, not taken’ that undermines financial markets weighing a hundred trillion dollars”, hammered the official.
“Regulation through repression is not an adequate way to control a market, protect consumers and promote innovation”, said, at the opening of the hearing, the chairman of the commission, the elected Republican Glenn ” GT” Thompson.
On Thursday, two elected Republicans in the House of Representatives, including GT Thompson, published a text supposed to serve as the basis for a bill to regulate cryptoassets. This text provides that the regulation could be shared between the SEC and the American regulatory authority for financial derivatives, the CFTC.
Other legislative proposals have already been presented in recent years, but none has yet gone to the vote.