The former head of internet enforcement at the US Securities and Exchange Commission (SEC) warned that the regulatory onslaught directed towards the crypto industry would never end.
He stated that crypto trading platforms like Coinbase and Binance are engaged in a game of regulatory arbitrage with the aim of making as much money as possible before they come crashing down.
The warning
On Saturday, John Reed Stark, a former official of the SEC, wrote a lengthy tweet in which he issued the said warning of the ongoing regulatory sweep aimed at the crypto space.
He is currently president of John Reed Stark Consulting, which is a cybersecurity firm. He founded the SEC Office of Internet Enforcement and remained its chief for about 11 years.
He also served as an enforcement attorney of the SEC for a duration of 15 years. He talked about the recent regulatory action that the SEC took against Bittrex.
He highlighted that the charges filed against the crypto exchange were similar to those made against other crypto exchanges like Binance and Coinbase.
According to the former SEC official, the use of terms like ‘exchanges’, ‘market-makers’, and ‘brokers’ by crypto trading platforms, such as Binance, Coinbase, Beaxy, and Bittrex is the problem.
This is because it is an automatic implication of consumer protection, oversight, and trust. He claimed it was just powerful grifting and could escalate into unlawful and dangerous marketing theater.
Further explanation
The SEC official said that the Securities and Exchange Act of 1934 had been introduced by Congress for preventing and monitoring investment schemes launched by large financial institutions.
The former official of the SEC also added that without registration with the SEC, the market would soon become the same as seen in the post-apocalyptic Walking Dead.
Therefore, he added that it was unlikely for the regulatory clampdown of the securities regulator to come to an end.
He said that the mission of the agency is threefold; protecting investors, maintaining efficient and fair markets and facilitating capital formation, so it was not going to back down.
The importance
He also went on to highlight the importance of exchanges registering with the SEC and crypto platforms registering as broker-dealers, as the tokens they list are securities.
Gary Gensler, the chairman of the SEC, has claimed that all crypto tokens classify as securities, with Bitcoin being the only exception.
But, a recent ruling from the court declared that XRP was not a security. The official also talked about crypto trading platforms that had been operating as unregistered exchanges.
He stated that even though the platforms were offering crypto assets that were classified as securities, they had not bothered to register with the securities regulator.
The former internet enforcement chief said that it was ironic that these platforms consider themselves the future of finance and innovation of money.
Stark warned that people should not be fooled by these platforms because they only have a sophisticated exterior and are essentially just a spectacular and old type of fraud.