Blockchain Association Joins Coinbase In Pushback Against SEC

The Blockchain Association, a prominent lobbyist group for the cryptocurrency industry in the United States, has called on SEC Chair Gary Gensler to recuse himself from enforcing rules on the crypto space. 

The United States Securities and Exchange Commission under Gensler has taken a hostile approach to crypto, filing lawsuits against several prominent crypto firms. 

Blockchain Association Pens Open Letter 

The call for the Securities and Exchange Commission Chair to remove himself from crypto-related matters was issued in the form of a statement released by the Blockchain Association. It comes after cryptocurrency exchange Coinbase filed a notice of intent on Wednesday, requesting a court to dismiss the regulator’s lawsuit against the exchange. In the letter, the Blockchain Association contends that Gensler has repeatedly asserted that everything other than Bitcoin is a security and that his statement gives the appearance that he cannot approach the issue with an open mind. The letter alleged that repeatedly expressing the same view meant that the SEC chair had prejudiced the central issue regarding digital asset-related enforcement proceedings. 

As a result, the letter alleged that Gensler’s vote on whether or not to proceed with filing an action was biased. The Blockchain Association also stated that any SEC enforcement action must follow the “Wells Process,” which would give the target of the enforcement action enough time to present evidence and arguments for their case. However, thanks to Gensler’s unbiased perspective, core questions related to the crypto industry would not receive a fair assessment from the SEC. Chief Policy Officer at the Blockchain Association, Jake Chervinksy, stated, 

“It’s clear that the digital assets industry cannot expect a fair assessment from Chair Gensler. His steadfast view that all digital assets except bitcoin are securities means that he cannot approach enforcement decisions with a fair and impartial mind, as required by the SEC’s Wells process and federal law. The time has come for Chair Gensler to recuse himself from all decisions related to digital asset-related enforcement matters. If he refuses, then I expect enforcement targets will begin raising the matter of his recusal in SEC proceedings and in federal district courts.”

Coinbase And The SEC 

The Securities and Exchange Commission had sued Coinbase, alleging that the platform offered users at least 13 crypto assets that are securities and should have been registered with the SEC. It had also sued Binance on similar charges just a day prior. In its reply, Coinbase stated that the Securities and Exchange Commission was well aware of the crypto exchange’s digital asset operations thanks to its public offering registration, which was done in April 2021. It further added that out of the cryptocurrencies that the SEC called securities, 6 were already trading on Coinbase when the agency reviewed the exchange’s public offering registration. Coinbase stated in its filing, 

“The only change is in the SEC’s position regarding its powers. That position is untenable as a matter of law, and its assertion through this enforcement action offends due process and the constitutional separation of powers.”

SEC Action On Crypto 

The Securities and Exchange Commission has undertaken considerable legal action against crypto exchanges during the ongoing year. Kraken was fined $30 million for offering crypto staking programs, with the SEC stating that the exchange was offering users unregistered securities. The agency also issued a warning to the Paxos Trust Company, an issuer of the Binance stablecoin, that it faces possible legal action. This led to Paxos freezing the minting of the stablecoin, which the SEC stated was an unregistered security. Coinbase criticized the SEC’s actions in its filing, saying that the SEC’s action in the current scenario was unlawful. 

“Rather than test its new view through notice-and-comment rulemaking, the SEC has chosen to roll out its ever-aggressive agenda through punitive retroactive enforcement actions. Agency enforcement authority is important but not boundless. The SEC’s action here is beyond those bounds and unlawful.”

The Blockchain Association was also critical of the SEC, stating that the federal agency’s actions under Gensler had further muddied regulatory waters and forced lawful crypto companies operating in the country to reconsider their operations and move to friendlier jurisdictions. 

The Political Divide 

Gensler’s hostile approach to crypto has found support with many Democrats, who have lauded his efforts. However, lawmakers on the other side of the aisle have roundly criticized the SEC and Gensler’s approach. Republican Congressman Warren Davidson also introduced a bill called the SEC Stabilization Act on the 13th of June. The bill sought to restructure the federal agency and remove Gensler as chair.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.