The Securities and Exchange Commission announced Monday that it is charging Bittrex, a crypto exchange, “for operating an unregistered national stock exchange, broker and clearing house.”
The SEC is also suing Bittrex’s foreign entity for “failing to register as a national stock exchange in connection with the operation of a single shared order book” with its parent company.
In recent weeks, we have seen the SEC take on Coinbase and Tron, not to mention Binance was fired by another US government agency (the CFTC). Suffice it to say that after falling behind the growth of the crypto market, government regulators are now stepping up.
Reactions have been mixed in relation to the SEC’s recent actions. In the crypto community, there is a common view that the US government is too heavy-handed in its enforcement actions; that the rules are either too vague or ill-suited to web3-related resources and activities; and that regulators should work more closely with industry to come up with new rules for what some see as a new method of approaching the exchange of value.
The SEC disagrees. In a comment that should serve as a clear omen of future activity, the agency said its Bittrex-related action “makes it clear that the crypto markets are suffering from a lack of regulatory compliance, not a lack of regulatory clarity. ” If you were hoping the SEC would relax its stance that crypto assets are more likely to be securities — and thus within the scope of existing regulation — this is not good news.
In the case of Bittrex, the agency points out that the crypto exchange has taken steps to avoid SEC scrutiny:
Bittrex and [William] Shihara, who served as the company’s CEO from 2014 to 2019, coordinated with issuers seeking to make their crypto asset available for trading on the Bittrex platform to first remove certain “problematic statements” from public channels that Shihara believed were would lead a regulator, such as the SEC, to scrutinize the crypto asset as offering a security. For example, in an effort to avoid regulatory scrutiny, before Bittrex would make an asset available on its platform, Bittrex and Shihara directed issuer applicants to remove statements related to “price predictions.”[s],” “earnings outlook” and other “investment-related terms.”
Bittrex was not a world leading exchange; ranked somewhere around 40th in global volume, news of the SEC’s actions has yet to shake crypto markets in a material sense. Yet small cuts can lead to material bloodshed, something the web3 world cannot afford in the current recession.