Coinbase’s Chief Legal Officer (CLO) Paul Grewal has openly challenged the U.S. Securities and Exchange Commission’s (SEC) use of the term “crypto asset security,” asserting that it lacks a legal foundation. This criticism arises as SEC Chair Gary Gensler and the other commissioners prepare to testify before the House Financial Services Committee.
Key Points of Contention
Grewal highlighted that the term “crypto asset security” is neither defined nor uniformly applied within SEC enforcement actions. He pointed out the SEC’s inconsistent classification of tokens as securities and investment contracts, leading to confusion and uncertainty in the industry.
Rep. Ritchie Torres also raised similar concerns during a recent congressional hearing, questioning the SEC’s terminology and its implications for blockchain innovation. Legal scholars, including Daniel Gallagher from Robinhood, have suggested that the term appears to be an invention without statutory backing.
Ripple’s Legal Officer Joins the Critique
Stuart Alderoty, CLO of Ripple, echoed Grewal’s sentiments, arguing that the SEC has been manipulating legal terminology to confuse the courts. He cited the SEC’s recent acknowledgment of misleading language in its complaint against Binance as indicative of its problematic approach.
Ripple continues to contest the SEC over the classification of XRP as a security, with Alderoty noting that the SEC’s inconsistencies could undermine its credibility in court.
SEC Under Increased Scrutiny
The upcoming congressional testimony of all five SEC Commissioners marks a significant moment, being the first collective appearance before Congress since 2019. Lawmakers have voiced increasing frustration over the SEC’s regulatory stance toward the cryptocurrency sector, with particular criticism directed at its approach to regulating crypto airdrops, which are seen as vital for decentralization.
House Majority Whip Tom Emmer and Chairman Patrick McHenry have been vocal in their opposition to what they perceive as a hostile regulatory environment towards blockchain technology. Additionally, Gensler faces scrutiny over allegations of improper hiring practices within the agency, potentially complicating the hearings.
As these discussions unfold, the tension between regulatory clarity and the innovation in the cryptocurrency space remains a pressing issue.
Related topics:
Changpeng Zhao Receives Lifetime Ban from Binance Leadership
Kamala Harris PAC Accepts Crypto Donations, Not Campaign Directly: Clarification by Coinbase
Robinhood Settles for $3.9M Over Crypto Withdrawal Restrictions
