Alexander Grieves, VP of Government Affairs at crypto-based asset manager Paradigm, details the problems with the U.S. Securities and Exchange Commission (SEC) policy.
This is the second time that Paradigm, an investment firm known for investing in major crypto industry proponents, has taken a dig at the notorious securities regulator.
“ SEC is under full-scale attack on the cryptocurrency industry in the name of investor protection”
Greaves criticized the SEC for launching an “all-out assault” on the cryptocurrency industry in the name of “investor protection,” which includes issuing wealth notices for anything that adds value to the cryptocurrency market.
“Under this Chairman and this Executive Director, if you created anything of value in cryptocurrency, you have experienced a subpoena, a wealth notice, an enforcement action/lawsuit, or all three,” Grieves wrote .
Coinbase is one of the victims of regulatory action, having received a Wealth Notice for its proposed Lend product in September 2021, just five months after the SEC approved their business model, product, and IPO. In March 2023 , Coinbase received another Wealth Notice .
Read more: What does it mean when you receive a Wealth Notice from the SEC?
Likewise, the SEC sued Kraken over its staking activities, forcing the exchange to move its services out of the U.S. and pay a $30 million fine. This came after Kraken reached a settlement with the regulator in February of that year.
Binance, the largest cryptocurrency exchange by trading volume, has also been under regulatory review . Other examples include actions against Robinhood, Uniswap, ConsenSys, OpenSea, and DEBT Box.
SEC Focuses Only on Litigation Strategies : 'Forum Shopping', 'Barbell Approach'
Paradigm’s vice president highlighted the fact that the cases against Kraken, Coinbase, and Binance were filed in different jurisdictions, and accused the SEC of “forum shopping.” This legal term refers to choosing the most favorable forum for a claim, a strategy plaintiffs use to obtain favorable results.
Paradigm executives also criticized the SEC’s “barbell” approach to cryptocurrency regulation. According to the vice president, the SEC targets small businesses that, due to limited resources, choose to settle rather than fight legal battles. The regulator uses these initial settlements to pursue larger companies in subsequent cases.
“This is part of the SEC’s strategy: Instead of focusing on just one company, they sue that company and then claim that all the other companies/projects/tokens/protocols (that may not be able to defend themselves) are securities as part of that case,” Grieves added .
This isn’t the first time Paradigm has criticized the SEC. BeInCrypto recently reported on the venture capitalist’s analysis of Gary Gensler’s tenure as Commission Chairman. The analysis came after the SEC’s joint deposition revealed 784 enforcement actions in 2023, resulting in $4.9 billion in fines and forfeitures.
In the study, Paradigm Policy Manager Brendan Malone detailed that the SEC has taken 171 enforcement actions in the cryptocurrency space since 2021. The pace of enforcement has increased since Gensler took over as head of the commission.
Read more: Cryptocurrency Regulation: What Are the Pros and Cons?
Malone criticized the SEC for not setting clear rules instead of using litigation to address policy issues. He also strongly criticized the agency for targeting individuals with limited resources to set precedents for token issuance cases.
In the same vein, Hester Peirce recently acknowledged flaws in the SEC’s cryptocurrency policy enforcement , a week after the agency’s handling of cryptocurrency regulation came under scrutiny by Congress and the Senate Banking Committee.
