A storm is beating down on the world of cryptocurrencies

The Securities and Exchange Commission (SEC), which regulates financial markets in USAbrought to court on Tuesday the country’s largest cryptocurrency exchange, coinbasewhich he accuses of violating current regulations, in the last of several blows suffered by this sector of the foreign exchange market.

Without a sectoral regulatory framework coming from Congress, the SEC has taken control of the regulation of cryptocurrencies, which it considers to be within its purview.

The complaint points to a sector already weakened by a series of scandalous bankruptcies last year, starting with that of FTX, the second world platform, whose managers are accused of making use of their clients’ money behind their backs. By 15:00 GMT, Coinbase shares were down more than 12% on Wall Street.

Filing the lawsuit in US federal court, the commission argued that Coinbase’s failure to register “has deprived investors of significant protections, including scrutiny by the SEC, record-keeping requirements, and conflict-of-interest safeguards, among others.”

“The SEC’s strategy, with a solely repressive approach in the absence of clear rules for the numerical asset industry, has a negative effect on the economic competitiveness of the United States and of firms such as Coinbase, which have demonstrated their commitment in matters in accordance” to the rules, the platform’s legal manager, Paul Grewal, reacted in a message sent to AFP.

“The solution involves legislation that defines fair rules, implemented transparently and applied equitably, and not through the courts,” he added. “While we wait, we will continue to operate in the same way,” he stressed.

The announcement of this action in a federal court in Manhattan, New York, comes the day after the lawsuit, also by the SEC, against the largest global cryptocurrency trading platform, Binance, accused of knowingly circumventing regulation with US clients.

The market supervisor targeted Coinbase for failing to register as an exchange and intermediary for cryptocurrency transactions.

“For the cryptocurrency sector as a whole, legal actions targeting two of the largest, most well-known companies will have an impact on consumer confidence in cryptocurrencies, which had already weakened,” summarized Douglas Clark, an analyst at the consulting firm Insider Intelligence.

By the end of 2022, Coinbase had 110 million users and $80 billion in assets hosted on its platform.

Far West

The complaint against Coinbase occurs at a time when a hearing on the regulation of cryptocurrencies is scheduled for this Tuesday before the Agriculture Committee of the House of Representatives of the US Congress, whose interest in financial markets focuses on agricultural derivatives of basic products.

Grewal, from Coinbase, will be among those who will appear before that instance of the Legislature.

“America is losing ground” before other countries with more complete legislation, argued the jurist in a previous statement; “they push technology and innovators abroad due to the lack of clear rules for cryptocurrencies.”

United States has “a more important place in the financial markets because it earned the trust of the public. (…) Cryptocurrency markets erode this trust”argued for his part the president of the SEC, Gary Gensler, in an interview with CNBC on Tuesday.

The cryptocurrency industry “It looks like the Far West (Far West)”summarized the person in charge.

“Regulation by repression is not an adequate way to control a market, protect consumers and promote innovation”, said at the opening of the Committee session the president of that body, Republican Glenn Thompson.

Last Thursday, two Republican legislators from the House of Representatives -Thompson among them- published a text that could serve as the basis for a bill to regulate crypto assets. Regulatory oversight could be split between the SEC and the agency responsible for regulating derivatives, the CFTC.

Source: AFP