The federal government’s long-awaited battle against cryptocurrency has begun—with the Securities and Exchange Commission (SEC) taking the opening shots.
- Last year proved disastrous for cryptocurrencies, with the collapse of numerous significant exchanges, the cooling of currency valuation, and widespread federal calls for regulation.
- The early months of 2023 have also proven to be a mixed bag, with Bitcoin resurging in price but scandals continuing to rock the market.
- SEC has long argued that crypto needs to be regarded as a security, and a new series of lawsuits reflects a long-prepared effort to crack down on the market in an effort to make it more challenging for these companies to engage in mainstream finance, The New York Times reports.
- In the past few weeks, the SEC has fined crypto lender Nexo and Genesis for selling unregistered securities, and reached a settlement with the Kraken exchange to remove certain investment products from the market.
- The SEC also filed a warning against Paxos alleging securities violations, sued crypto exchange Terraform regarding the collapse of its two currencies Luna and TerraUSD, and fined NBA star Paul Pierce over improper disclosures.
Why It’s Important
As we previously reported, the federal government’s crypto crackdown has been coming for a long time. The precipitous collapses of Terraform Labs, Celsius, Voyager, Three Arrows Capital, and FTX added urgency to the reaction. In the past few months, the White House, the Department of Justice, the SEC, the Federal Reserve, and Congress have all advocated cracking down on crypto.
The crackdown could prove dangerous for the crypto economy, which is already showing signs of decline from its valuation peak in November 2021. Users have dismissed the federal government’s response as “Operation Choke Point 2.0.”
“I’ve been referring to it as the crypto carpet bombing. Every couple hours, we hear of some new enforcement action,” Blockchain Association executive director Kristin Smith tells The New York Times.
“What’s happening today is a coordinated effort that cuts across multiple agencies and seemingly reflects a unitary view that the entire crypto industry needs to be restrained. It’s important for the crypto industry to prepare itself for a long fight,” says Coinbase legal officer Paul Grewal.