A former official of the SEC, John Reed Stark, criticized crypto pressure groups as they labeled the actions of the Securities and Exchange Commission as ‘regulation by enforcement’. The former chief of the SEC’s office called off the term a “big bogus crypto catchphrase,” saying that the argument misguides and the goal of SEC’s enforcement in crypto is to extend “investors’ protection” in the market.
According to SEC’s chair, trading cryptocurrencies are a kind of investment contract, and major exchanges influencing the crypto market should register with the SEC and follow applicable laws.
John Reed argues that SEC enforcement and litigation are the origins of security regulation, and the pliability of the SEC Statutory is a hallmark. It enables the Securities and Exchange Commission to keep fraud in check and has become a necessity of the digital asset market, seeing the fraud and manipulation people are facing.
‘In fact, the repetitive chorus of RBE is not only a misguided, reflective effort designed to tap into sympathetic libertarian and anti-regulatory mores- it’s also utter nonsense,’ Reed continued further.
He remembers the criticism given to the SEC office of Internet Enforcement back in 1998 when critics commented about it being vague and restrictive to the growth of the internet.
“In hindsight, relying upon the flexibility of securities regulation to police the Internet cleared out the more egregious instances of early online securities fraud,” he bounced back.
The same is undeniable and it would be wrong to disagree. Online enforcement efforts by the SEC have paved the road for licit technical innovations to flower by making the markets transparent and more efficient. This in turn has led to more successful opportunities for investors.
Over the last decade, the SEC has ended up launching many high-profile cases against crypto agencies like LBRY and Ripple. Few critics have argued that the SEC is not using clear regulations or developing laws on a case-by-case basis. In consonance, regulating without a specific set of rules causes uncertainty by not providing fixed guidelines to businesses. This leads to inconsistent interpretation and poor enforcement, increasing costs.
Ripple general counsel Stuart Alderoty has also expressed concerns about this approach by the Securities and Exchange Commission, citing the massive collapse of FTX and related transmission that engulfed Blockfi. Though in Stark’s opinion, the SEC followed the law through with its actions and cited major legal victories to back his statement.
He explains that the approach is seldom expansive and does not have rogue SEC efforts.
In most cases, the SEC decides to apply the necessary requirements of federal security laws to present-day technology and market conditions in a manner that is logical and reasonable.