SEC - Page 24

The upcoming 2024 election may influence how the U.S. Securities and Exchange Commission (SEC) handles crypto policies, as noted by Consensys’ senior counsel.

At the Consensus conference in Austin on May 29, Bill Hughes, Consensys senior counsel and director of global regulatory matters, discussed the uncertain impact of the evolving political and regulatory landscape on Consensys’ lawsuit against the SEC over Ether.

In the past month, lawmakers have pushed for regulatory clarity at the SEC, and the commission has approved the spot for Ether exchange-traded funds (ETFs) for the first time.

Additionally, digital assets have played a role in the actions of both major party presidential candidates ahead of the election.

Hughes commented on the approval of spot Ether ETFs, saying, “What impact this has on the investigations [the SEC has] open, their theories as to what is or is not a securities offering in their view, has yet to be seen.

“We think it’s a fundamentally positive development and a development that shouldn’t have been controversial whatsoever.”

In April, Consensys filed a lawsuit against the SEC in Texas, alleging plans to regulate Ether as a security.

The company received a Wells notice from the SEC, warning of potential enforcement actions related to its MetaMask Swaps and MetaMask Staking products.

This lawsuit preceded the SEC’s approval of 19b-4 filings for several asset managers to list and trade spot Ether ETFs, suggesting the SEC largely viewed Ether as a commodity.

Consensys’ filings included statements from SEC Chair Gary Gensler and enforcement division head Gurbir Grewal, who approved a formal investigation into Ether as a security.

Hughes remarked, “The political landscape is shifting, and the full impact of that on the commission’s decisions and on the work of the staff has yet to be seen.

`’What the chair and his two Democratic colleagues might now be thinking that they weren’t two weeks ago is really the question.”

He speculated on the SEC’s actions: “I don’t expect a wave of proposed rulemakings like the industry has suggested for years now.

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“[Approving spot Ether ETFs] may be the only thing that they do which is considered less antagonistic to crypto than they’ve normally been doing.”

The U.S. Senate may consider the Financial Innovation and Technology for the 21st Century Act (FIT21) within a year of its passage in the House of Representatives.

`’This bill would clarify the SEC’s role over digital assets, allowing the Commodity Futures Trading Commission to regulate many tokens as commodities.

Hughes noted, “It was always our belief that the politics — maybe not external from the SEC but inside the SEC — was fueling a decision to dictate certain policy choices.

But if there are external pressures for particular policy approaches that are impacting decision-makers at the SEC […] how else it’s going to filter down in the different divisions has yet to be seen.”

On June 5, Chair Gensler suggested the SEC would “take some time” greenlighting the S-1 registration statements from asset managers applying for spot Ether ETFs, with analyst Eric Balchunas predicting a July 4 launch date for these ETFs in the U.S.

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Robinhood, a stock trading app, is set to expand its footprint in the cryptocurrency industry by acquiring the Bitstamp cryptocurrency exchange in a $200 million deal.

This acquisition will allow Robinhood to cater to institutional clients in the United States.

The transaction is awaiting regulatory approval and is anticipated to close in the first half of 2025.

Johann Kerbrat, the general manager of Robinhood Crypto, cited increasing customer demand for cryptocurrency products as the driving force behind the acquisition.

Speaking to The Wall Street Journal on June 6, he noted, “Everything we’ve been doing in the past few years has been because our engagement from customers has been that they want more crypto products.”

Robinhood’s co-founder and CEO, Vlad Tenev, emphasized the transformative potential of cryptocurrency in a June 6 X post: “Soon we’ll combine forces with Bitstamp’s global footprint, core spot exchange and industry-leading products like crypto-as-a-service, institutional lending, and staking.”

The acquisition aims to leverage Bitstamp’s established offerings, such as institutional lending and staking, alongside its white-label solution.

Robinhood has been broadening its cryptocurrency services since 2018, initially offering Bitcoin and Ether trading.

Kerbrat highlighted the strategic importance of the deal, stating, “Bitstamp’s highly trusted and long-standing global exchange has shown resilience through market cycles.

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By seamlessly coupling customer experience with safety across geographies, the Bitstamp team has established one of the strongest reputations across retail and institutional crypto investors.”

Founded in 2011, Bitstamp boasts over 50 regulatory licenses and registrations globally and will continue to operate under its own branding post-acquisition.

However, the deal coincides with potential legal challenges for Robinhood.

On May 4, the U.S. Securities and Exchange Commission (SEC) issued a Wells notice to Robinhood, signaling the conclusion of its investigation into the company’s U.S.-based crypto business.

The SEC is considering enforcement action related to alleged securities violations concerning Robinhood’s cryptocurrency listings and custodian operations.

Despite these challenges, Dan Gallagher, Robinhood’s chief legal officer, expressed disappointment in a May 6 blog post, stating, “After years of good faith attempts to work with the SEC for regulatory clarity including our well-known attempt to ‘come in and register,’ we are disappointed that the agency has decided to issue a Wells Notice related to our U.S. crypto business.” Robinhood remains committed to cooperating with the SEC to resolve these issues.

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Nayib Bukele, El Salvador’s pro-Bitcoin president, has been inaugurated for a second five-year term following a decisive victory in February’s elections, stirring considerable excitement in the cryptocurrency community.

His administration’s pioneering stance on Bitcoin has been particularly celebrated within the industry.

Crypto commentator Cory Bates expressed his enthusiasm on social media, stating, “Bukele is Proof of Work— Cheers to 5 more years.

“God bless El Salvador.”

Meanwhile, crypto media figure Pete Rizzo reflected on Bukele’s tenure, noting, “Exactly 5 years ago today, Nayib Bukele took the Oath of Office, becoming President of El Salvador.

Ever since, the country has been a world leader – a beacon of freedom, safety, and innovation.

“The 1st Bitcoin President.”

The inauguration was held on June 1 at the National Palace in San Salvador, where President Bukele discussed the significant reduction in crime during his previous term, emphasizing his administration’s aggressive approach to dismantling gang influence.

“In two years we turned around a situation that had been unresolved for more than half a century, with more than 70,000 terrorists controlling the country, and who left more dead than the armed conflict,” Bukele declared.

Bukele’s anti-crime initiatives garnered domestic support, but his international acclaim largely stemmed from his embrace of cryptocurrency.

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In September 2021, El Salvador made history by becoming the first nation to recognize Bitcoin as legal tender, an announcement that initially met with skepticism among Salvadorans, as a Reuters poll in July 2021 suggested that over three-quarters of the population were doubtful of the move.

In the February elections, Bukele’s New Ideas party achieved a significant win, securing 54 of the 60 legislative seats, which strengthened his ability to implement his policies.

Although the official election results were pending, Bukele announced an early victory on February 5, claiming his party had won 58 seats.

Further demonstrating the potential influence of Bukele’s policies, Argentina appears to be considering a similar path towards cryptocurrency integration.

A recent report from May 27 indicated that Argentina’s National Securities Commission (CNV) met with El Salvador’s National Commission of Digital Assets (CNAD) to discuss the adoption and regulation of cryptocurrencies, signaling a possible regional shift towards embracing digital assets.

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Coinbase has accused the U.S. Securities and Exchange Commission (SEC) of employing a regulation-by-enforcement strategy to deliberately stifle the cryptocurrency industry.

In a May 31 filing with the U.S. Court of Appeals, Coinbase critiqued the SEC’s reluctance to establish clear and equitable regulations for the crypto sector, which they argue is intended to “choke” the industry’s growth.

In the document, Coinbase expressed frustration with the SEC’s approach, stating, “The SEC is serious about the destruction of digital assets.”

The filing highlighted the agency’s apparent disinterest in negotiating fair rules, noting that giving the SEC more opportunities to clarify its position would be “both pointless and exquisitely undeserved.”

Coinbase also argued that the SEC does not see it as its responsibility to ensure compliance is feasible, claiming that the agency finds its current rules “workable enough” as evidenced by its litigation against various firms for rule violations.

This stance was reinforced by the mention of other SEC Commissioners who agree that the SEC’s actions are detrimental to the progress of digital assets and innovation.

The situation has been further complicated by legal actions the SEC has taken against firms like Coinbase. In June 2023, the SEC sued Coinbase for operating without proper registrations as a broker, securities exchange, or clearing agency.

Despite efforts to dismiss the lawsuit, Coinbase has faced opposition from the SEC at every turn.

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Even with a forecast by Bloomberg’s senior litigation analyst Elliott Stein, suggesting a 70% likelihood of a full dismissal, the case remains unresolved.

Amidst these tensions, SEC Commissioner Hester Pierce has proposed solutions like a cross-border sandbox program to facilitate cooperation between U.S. and U.K. firms experimenting with tokenized securities.

During a panel at Consensus 2024, Pierce criticized the SEC’s unyielding bureaucracy, noting, “One of the problems that we’ve had is that people have tried to come into the SEC to get relief, but, you know, you sort of come in, and nothing happens.

“This would […] force the SEC’s hand a little bit.”

While Coinbase acknowledges that the SEC’s stringent rules might only affect a small portion of the market, it argues that the overall approach remains oppressive.

The company and other stakeholders in the crypto industry continue to push for fairer regulatory treatment as the SEC maintains its stringent stance.

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United States President Joe Biden has vetoed a resolution aimed at overturning the U.S. Securities and Exchange Commission (SEC) Staff Accounting Bulletin (SAB) No. 121.

This controversial decision has drawn immediate criticism from the cryptocurrency industry.

“We’re disappointed that the admin chose to overrule bipartisan majorities in both Houses of Congress who recognized the harm created by SAB 121,” stated the Blockchain Association in a May 31 X post, following Biden’s argument that opposing the guidelines would undermine the SEC’s authority.

“This reversal of the considered judgment of SEC staff in this way risks undercutting the SEC’s broader authorities regarding accounting practices,” Biden wrote in an official May 31 letter.

The letter was in response to Congress’s vote to repeal the cryptocurrency accounting guidelines, which require institutions that custody crypto assets to record these holdings as liabilities on their balance sheets.

“My Administration will not support measures that jeopardize the well-being of consumers and investors,” Biden added.

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Lawmakers in the House of Representatives voted to repeal the SEC’s guidance by a margin of 228 to 182, subsequently passing the bill to the Senate.

Senators echoed the House’s sentiment, voting to repeal SAB-121 with a significant margin of 60-38 votes.

The broader crypto community expressed frustration on social media, arguing that the decision stifles innovation and hinders the industry’s progress during a critical time.

“This is a slap in the face to innovation and financial freedom,” stated Digital Chamber chief policy officer Cody Carbone in a May 31 X post.

“To say that this is incredibly disappointing from this White House – at an incredibly pivotal time – is an understatement,” Ripple CEO Brad Garlinghouse added.

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Financial innovators are taking a long-term approach with the United States Securities and Exchange Commission (SEC), which Franklin Templeton’s head of digital assets, Roger Bayston, deems appropriate.

“The SEC, like a lot of regulatory bodies, likes to rely on legal precedents. […] Those precedents are being set in courts of law oftentimes, so this is just the process we’re engaged in,” Bayston told Cointelegraph’s Turner Wright at the Consensus event.

Despite skepticism about the SEC’s “open door” policy, Bayston viewed the agency’s actions as protecting the economy and manageable:

“We wouldn’t be in the business for 76 years — the business of trust — if we didn’t have some discipline and persistence and collaborative behavior with the global regulators we face.”

Bayston noted that things are evolving at the SEC, comparing this year to last. “We’ve been pleasantly engaged with the SEC […] and we’re excited as they shift and change their tone,” he said.

Franklin Templeton launched its Franklin OnChain U.S. Government Money Fund (the “Benji”) in 2023, but the journey took nearly five years, involving educating the SEC on blockchain technology’s role in mutual funds.

Bayston likened tokenized money funds to stablecoins.

The saver provides money to the operator, who invests it and returns the principal while keeping the profit from the investments.

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“Banks and money funds have existed side-by-side for multiple decades.

“I think this is the same construct that is likely to move forward,” Bayston said.

Franklin Templeton is optimistic about cryptocurrency, according to Bayston:

“We believe in the technologies and therefore we believe that the [crypto] tokens, properly structured, represent value for these technologies.”

He compared crypto’s significance to investment portfolios to that of technology stocks 30 years ago.

Franklin Templeton filed its application with the SEC for a spot Ether exchange-traded fund later than others.

Initially, the SEC delayed a decision on the application until June 11 but approved it along with others on May 23.

Bayston was not surprised by the timing. They were “not trying to give anybody an advantage in this nascent marketplace,” he said.

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Elon Musk’s artificial intelligence venture, xAI, has successfully completed a $6 billion Series B funding round.

This funding round saw significant participation from investors such as Valor Equity Partners, Vy Capital, Andreessen Horowitz, Sequoia Capital, Fidelity Management & Research Company, and Prince Alwaleed Bin Talal through Kingdom Holding.

This milestone has propelled xAI’s valuation to $24 billion, achieved just 11 months after its launch in July 2023.

In comparison, OpenAI, the creator of ChatGPT, stands at a valuation of $80 billion, having launched in December 2015, giving it an eight-year lead over xAI.

The newly raised funds will be utilized by xAI to enhance the research and development of its AI systems aimed at societal benefits and to expedite the launch of its first product.

The announcement highlighted:

“xAI is primarily focused on the development of advanced AI systems that are truthful, competent, and maximally beneficial for all of humanity.

“The company’s mission is to understand the true nature of the universe.”

Following the funding announcement, Musk reached out to his 184 million followers, urging them to consider joining his AI venture.

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He stated in a May 27 X post:

“Join xAI if you believe in our mission of understanding the universe, which requires maximally rigorous pursuit of the truth, without regard to popularity or political correctness.”

Last November, xAI introduced its first AI chatbot, Grok-1, on X.

This was followed by Grok-1.5 on April 12, which added image-understanding capabilities to process documents, diagrams, charts, screenshots, and photos.

Additionally, in March, the network architecture of Grok-1 was open-sourced.

While Grok is still in its early stages compared to OpenAI’s ChatGPT, Musk anticipates that it could become a competitor by the end of this year.

Speaking at Viva Tech Paris 2024, he noted:

“xAI is a new company so it still has a lot of catching up to do before it has an AI that is competitive with Google DeepMind and OpenAI. Maybe towards the end of the year, we will have that.”

Despite his forward-looking goals, Musk has expressed concerns about the rapid development of AI.

“In March, over 2,600 tech experts, including Musk, signed an open letter calling for a pause on AI development, citing “profound risks to society and humanity.”

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On May 23, the United States Securities and Exchange Commission (SEC) approved spot Ether exchange-traded funds (ETFs), marking a notable difference from the approval of spot Bitcoin ETFs in January.

Unlike the Bitcoin ETFs, which were approved via voting by a five-member committee including SEC chief Gary Gensler, the spot Ether ETFs were approved by the SEC’s Trading and Markets Division.

The SEC greenlit the 19b-4 filings from several firms including BlackRock, Fidelity, Grayscale, Bitwise, VanEck, Ark, Invesco Galaxy, and Franklin Templeton.

The Commission did not provide additional comments beyond the official decision.

The official filing stated: “For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.”

While the crypto community questioned the differing approval processes, Bloomberg ETF analyst James Seyffart explained it as a routine procedure.

He noted that many approvals are typically handled in this manner and requiring an official vote for every decision would be impractical. Seyffart added, “It would have been nice to see where the political lines were drawn.”

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However, some individuals remain skeptical of Seyffart’s assessment.

One user on X pointed out that a commissioner could still challenge the decision within the next 10 days, suggesting that delegated authority might be used to obscure potentially politically charged votes.

Another user on X speculated that the SEC’s decision was influenced by various factors, including political pressure, upcoming elections, and the implementation of environmental, social, and governance (ESG) rules.

A significant difference between the approval processes for the two crypto ETFs is the timeline for trading.

All 11 Bitcoin ETFs began trading the day after their approval, as they also received S-1 form clearance.

In contrast, spot Ether ETFs might take weeks or months to debut on exchanges since the ETF filers have not yet received the S-1 SEC registration.

Overall, the approval of spot Ether ETFs marks another step forward in the crypto market, albeit with procedural differences and potential political undercurrents.

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