Former SEC Official Warns ‘Crypto Regulatory Onslaught Will Never End’

Former SEC Official Warns ‘Crypto Regulatory Onslaught Will Never End’ – The former head of internet enforcement at the U.S. Securities and Exchange Commission has cautioned that the continuous wave of crypto regulations will persist indefinitely. He suggested that cryptocurrency trading platforms, including Binance and Coinbase, are engaging in a strategy of exploiting regulatory differences to maximize profits before an inevitable downfall. 

John Reed Stark, previously associated with the SEC for over a decade, expressed this viewpoint in a comprehensive tweet on Saturday. He currently leads John Reed Stark Consulting, a cybersecurity firm. Referring to the recent regulatory action taken by the SEC against cryptocurrency exchange Bittrex, he pointed out that the charges against Bittrex mirror those taken against other crypto exchanges, including Coinbase and Binance. 

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The former SEC official stressed that “by calling themselves ‘exchanges,’ ‘brokers,’ and ‘market-makers,’ crypto trading platforms like Bittrex, Beaxy, Coinbase, Binance, and others co-opt historically powerful nomenclature that implies trust, oversight and consumer protection, etc.” He cautioned: “This powerful grift can quickly evolve into dangerous and unlawful marketing theater.” He explained that “Congress enacted the Securities and Exchange Act of 1934 to prevent and police investment schemes orchestrated by large financial conglomerates of any ilk.”

Emphasized that “a Walking Dead-like post-apocalyptic marketplace quickly evolves” without SEC registration, the former SEC official asserted: “This is why the SEC’s crypto-enforcement sweep will never end.” He added that the crypto regulatory onslaught will not end because the SEC has a “threefold mission (to protect investors; to maintain fair, orderly and efficient markets; and to facilitate capital formation)” that is “far too critical for the SEC to relent.”

Stark went on to elaborate about the significance of SEC exchange and broker-dealer registration for cryptocurrency platforms that offer tokens classified as securities. While SEC Chairman Gary Gensler’s stance is that all crypto tokens, excluding bitcoin, fall under the category of securities, a recent legal decision contradicted this by determining that XRP is not considered a security. He also discussed “the defiance of crypto trading firms,” stating: “For years too many crypto trading platforms have been operating as unregistered exchanges.”

The former SEC internet enforcement chief claimed: “Crypto trading firms have carried out these functions despite the fact that the crypto assets it has made available have included crypto asset securities,” adding: “Financial firms like Binance, Coinbase, Beaxy, Bittrex, and other crypto-trading platforms are simply playing (and winning) a short game of regulatory arbitrage, all carried out in an effort to make as much fiat as possible before their inevitable demise (or severe reduction in size).”

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“The biggest irony is that these so-called ‘crypto-exchanges’ claim to be champions of the future of finance and promote themselves as digital couriers of transformative innovation that is the future of money,” Stark continued. “Don’t be fooled. Beneath their sophisticated exterior, these crypto trading platforms are masquerading a spectacularly mammoth (and effective) affinity fraud that is as old as finance itself.”

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