Any exchange that supports the trading of securities must first register with the SEC—a process that comes with various reporting and diligence requirements. SEC chair Gary Gensler has longBut the demand creates a catch-22 of sorts that threatens viability in the US of crypto assets that are deemed securities: Gensler demands that crypto exchanges register with the SEC, but the exchanges claim there is no means of doing so.
The complaints against Coinbase and Binance are likely to take years to pass through the courts—as demonstrated by the SEC’s, which deals in many of the same issues. Short of legislative intervention from Congress, questions around the classification of crypto assets and jurisdiction of the SEC will remain unresolved too. All the while, the US crypto industry will hang in limbo.
Some in the industry think that’s part of the motivation. “It’s an effort to chill the market,” says Justin Browder, partner at law firm Willkie Farr & Gallagher. The complaints will serve to put crypto on ice in the US, he explains. For now, exchanges will continue to operate and customers are still able to trade, but a question mark will hang over the legality of the crypto assets named in the complaints for the duration of the legal proceedings.
Browder says the charges brought by the SEC this week indicate that the agency is perfectly comfortable with a future in which US residents have limited access to crypto assets. “The undercurrent is that the SEC views crypto assets, in the way they’re currently offered, as inappropriate for retail investors,” says Browder. “If the SEC thinks this asset class needs to be curtailed, these two actions are the most effective way to send the signal.
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