The SEC has come under increasing criticism as the agency remains relentless in its war on cryptocurrencies.
On April 21, Web3 venture capital firm Paradigm published a policy article on SEC registration issues. It claims SEC Chairman Gary Gensler "is a poor policy attempt to force crypto assets that may not even constitute 'securities' into an inappropriate disclosure frame.
The firm, which has invested hundreds of millions of dollars in crypto and Web3 startups, said the SEC has failed to provide crypto asset users and investors with the information they need. It also denied the SEC's claim that it offers cryptocurrency entrepreneurs a viable path to compliance.
Paradigm notes that the current disclosure policy was created in the 1930s, well before the Internet. It claims that the current policy is "tailor-made for centralized companies that issue securities" and that the crypto market is fundamentally different. The company noted that securities provide holders with legal rights against a central entity, however, most cryptocurrencies do not have “legal rights” but rather “technical capabilities in the protocol.”
Furthermore, cryptoassets can be completely independent of their issuers and maintain full functionality without their input. Unlike traditional securities and stocks, crypto assets can also be traded peer-to-peer and on a completely different technology system stackar, which on an " of intermediaries."
The venture capital firm concluded that financial regulators need to revise their current disclosure regimes to incorporate new technologies and asset classes. “Not surprisingly, the SEC will not be able to effectively regulate the crypto asset market without significant loss. Paradigm is not only present of the crypto industry criticizing the SEC and its policies. Congressman Warren Davidson has also been talking about the agency and its chief "patrol cop."
On April 16, the pro-cryptocurrency politician introduced legislation “to correct a series of abuses” aimed at replacing Gensler with an executive director who reports to the board.
Gensler was grilled by House Financial Services Committee Chairman Patrick McHenry during an April 18 hearing on SEC oversight. “Obviously, an asset cannot be both a commodity and a security,” McHenry said, as Gensler declined to say what he thought the classification of ether would be Ethereum.
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