As the crypto space continues its exponential growth and creates a niche for itself in the digital finance sector, it continues to be plagued with regulatory challenges and policy decisions in most countries. Whether it’s India, which imposes a hefty 30% tax on crypto trading, or China and Qatar which have completely banned cryptocurrency, crypto businesses struggle for freedom to operate.
The U.S. government is no exception, as crypto traders accused regulators of an all-out war against crypto innovations.
While some proponents justify law enforcement actions by citing consumer protection, others argue that governments worldwide simply do not want to lose control over people’s money.
An uncertain future of crypto in a nation spells doom for the ecosystem as it deters traders and prospective investors thereby undermining any chances of crypto adoption.
Let’s explore how the U.S. government and regulatory authorities have pursued crypto businesses and how some crypto advocates are preparing to counter this with legal action.
US’s Bank Crisis of 2023 and Crypto as Scapegoat
In 2023, the USA through the SEC carried out the biggest clampdown on the crypto sector. Notably, this was the same time the U.S. banking sector witnessed the disastrous collapse of several banks. Three small-to-midsize U.S. banks failed within a short period: Silicon Valley Bank (SVB), Signature Bank, and First Republic Bank. This led to a sharp decline in global bank stock prices.
After initial skepticism that the collapse was triggered by the relationship between banks and cryptocurrencies, it was found that the turmoil resulted from poor risk management and macroeconomic issues.
Mark Williams, a former Federal Reserve bank examiner, stated, “When you lose depositor confidence, not even the strongest bank can stand up.”
Supporting this, Nellie Liang, the U.S. Treasury Department’s undersecretary for domestic finance, also denied the theory that cryptocurrency had any direct role in the collapse of banks in 2023.
Despite clear signs that cryptocurrency wasn’t behind the banks’ failure, U.S. regulatory authorities allegedly blamed the volatile nature of crypto markets behind the failure in the banking sector. Crypto enthusiasts across the globe cried foul at the accusations.
SEC Sued Two Major Crypto Exchanges Within 72 Years
After the Bank crisis in March, the Security and Exchange Commission took legal action against two of the biggest crypto exchanges–Binance and Coinbase.
In the complaint, the regulatory agency accused Binance and its affiliate BAM Trading Services Inc., and founder Changpeng Zhao of 13 charges. This includes unregistered exchanges, broker-dealers, and clearing agencies; misrepresenting trading controls and oversight on the Binance.US platform; and the unregistered offer and sale of securities.
In its complaint against Coinbase, filed on June 6, 2023, the SEC accused the company of violating federal securities laws by operating its trading platform as an unregistered national securities exchange, broker, and clearing agency.
Additionally, the SEC claimed that Coinbase conducted unregistered securities offerings through its staking-as-a-service program. The SEC also alleged that Coinbase’s activities lacked significant investor protections like proper disclosures, conflict-of-interest safeguards, and routine inspections by the SEC.
SEC Declare Ether Security
In another turn of events, SEC Chairman Gary Gensler’s notable statement came out during a court hearing, declaring, ‘Everything else other than Bitcoin is a security.
This statement shook the crypto community as it made clear how the U.S. government and regulatory authorities intend to regulate the crypto market.
Shockingly, some U.S. companies revealed that the SEC has launched an aggressive campaign to classify Ethereum (ETH) as a security. These companies have stated that they have received subpoenas supporting their claim.
The latest…
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