And So, the SEC’s Crackdown Begins

In the course of several days, the US Securities and Exchange Commission (SEC) has proven that it is ready to tighten its grip on crypto.

First, the SEC charged Payward Ventures, Inc. and Payward Trading Ltd., both commonly known as Kraken, with failing to register the offer and sale of their crypto asset staking-as-a-service program. To settle these charges, the entities agreed to immediately cease offering or selling securities through crypto asset staking services or staking programs and pay $30 million in disgorgement, prejudgment interest, and civil penalties.

Today, the SEC also announced that it is planning a lawsuit against Paxos Trust, the issuer of two stablecoins, Pax Dollar and BUSD. The New York Department of Financial Services (NYDFS) has reportedly ordered Paxos Trust to stop the issuance of dollar-pegged Binance USD. 

Coinbase’s CEO Brian Armstrong is also gearing up for potential scrutiny, tweeting “Coinbase's staking services are not securities. We will happily defend this in court if needed.”

Source: Brian Armstrong’s Twitter

In a relevant blog, Coinbase also states that “trying to superimpose securities law onto a process like staking doesn’t help consumers at all and instead imposes unnecessarily aggressive mandates that will prevent US consumers from accessing basic crypto services and push users to offshore, unregulated platforms.”

Meanwhile, Ethereum’s co-founder Joseph Lubin has recently emphasized that there is no chance that ETH is a security in light of SEC Chairman Gary Gensler’s suggestion that the token has become that as a result of the Proof-of-Work to Proof-of-Stake transition. 

The new measures by the SEC have already caused a backlash in the crypto community and the institution itself. The SEC’s Commissioner Hester Peirce, dubbed the “Crypto Mom”, has asserted the crackdown on Kraken in particular was not fair and called on the SEC to focus on developing transparent rules for the companies.

The SEC has noticeably become more anti-crypto under Gensler who has been in office since 2021. 

The previous top brass, including the SEC’s Chairman Jay Clayton, ruled in 2018 that neither Bitcoin nor ETH is a security. It did, however, initiate several lawsuits, including against Ripple and Telegram’s TON that the regulatory body deems securities.

Previously, The Coinomist explained why it is a bad idea to avoid crypto taxes.