SEC - Page 56

On-chain derivatives are predicted to experience significant growth in the decentralized finance (DeFi) sector, according to Henrik Andersson, the Chief Investment Officer of Australian crypto investment firm Apollo Crypto.

In an interview with Cointelegraph, Andersson highlighted the increasing popularity of decentralized spot trading as a catalyst for the growing demand for decentralized derivatives.

Andersson emphasized that while decentralized spot exchanges have been gaining market share from centralized exchanges for the past six years, decentralized perpetuals and futures trading are relatively new, presenting a high-growth opportunity for on-chain derivatives.

This trend has been further accentuated by the surge in daily trading volume on decentralized exchanges (DEXs) during the memecoin frenzy in May, which briefly surpassed that of established centralized crypto exchanges like Coinbase.

Additionally, the trading volumes on DEXs spiked by over 400% following regulatory actions against Binance and Coinbase in June.

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Andersson revealed that Uniswap, a leading DEX, has been trading more daily volume than Coinbase over the past year, and DEXs have been steadily gaining ground in terms of overall market share.

He pointed out that monthly spot trading volumes on DEXs have exceeded $50 billion.

Furthermore, Andersson anticipated that the trend of futures-heavy trading seen in centralized exchanges would also be replicated in DeFi, making on-chain derivatives the best product-market fit for the DeFi space in years.

He noted that futures trading accounted for nearly 80% of the entire crypto market’s trading volume on centralized exchanges in June.

In addition to on-chain derivatives, Andersson mentioned two emerging market sectors that have caught his attention.

The first is NFTFi, which combines non-fungible tokens (NFTs) and DeFi, enabling investors to rent, borrow, fractionalize, create derivatives, and establish prediction markets based on NFTs.

Andersson believed that NFTs would be utilized for a wider range of functions within the DeFi space due to their strong investment narrative.

The second emerging theme mentioned by Andersson is LSDFi, which leverages liquid staking derivative (LSD) tokens, such as Lido Staked ETH (stETH) and Rocket Pool ETH (rETH), allowing investors to borrow, speculate, and hedge against their LSD tokens.

The popularity of LSDs has grown rapidly, with LSD protocols surpassing DEXs in terms of total value locked (TVL) after Ethereum’s Shapella upgrade.

Andersson acknowledged the need to address the issue of centralization among certain staking providers in the LSD space and called for a more balanced array of protocols to ensure a diversified environment.

In conclusion, Andersson’s insights highlight the potential of on-chain derivatives as a significant growth sector within DeFi.

He also recognized the emerging sectors of NFTFi and LSDFi as areas of interest, indicating their potential impact on the DeFi landscape.

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Cryptocurrency exchange Bittrex has taken a significant step in its legal battle against the United States Securities and Exchange Commission (SEC) by filing a motion to dismiss the case.

Bittrex’s argument centers around the claim that the SEC lacks the authority to regulate cryptocurrencies as securities unless specifically granted by Congress.

By challenging the SEC’s interpretation of existing securities regulations, Bittrex aims to establish a clearer regulatory framework that accommodates digital assets.

In a strategic move reminiscent of Coinbase, Bittrex has closely aligned its arguments with those of the larger cryptocurrency exchange.

This alignment suggests that Bittrex intends to leverage the robust legal framework established by Coinbase and construct a unified defense against the SEC’s lawsuit.

Similar to Coinbase, Bittrex’s legal team highlights what they perceive as deficiencies in the SEC’s allegations concerning the trading of investment contracts.

While both defendants acknowledge that the initial sale of certain crypto assets could be classified as securities contracts, they contend that this classification does not extend to assets traded on secondary markets.

Bittrex argues that once an asset is launched and actively traded on secondary markets, it should no longer be considered a security but rather categorized as a commodity or another class of digital asset.

Furthermore, Bittrex asserts that the SEC did not adequately convey that its actions were prohibited, employing a defense strategy commonly used by cryptocurrency defendants challenging the SEC’s allegations.

The legal dispute between Bittrex and the SEC originated in April when the SEC charged Bittrex and its co-founder, William Shihara, with operating an unregistered national securities exchange.

The complaint alleges that Bittrex facilitated the trading of digital assets that met the securities criteria outlined in U.S. federal securities laws without obtaining SEC registration as an exchange.

Additionally, the SEC charged Bittrex Global, the foreign affiliate of Bittrex, with failing to register as a national securities exchange in the same complaint.

Bittrex’s motion to dismiss represents a pivotal moment in its fight against the SEC.

By challenging the SEC’s authority and aligning its arguments with those of Coinbase, Bittrex aims to establish a more defined regulatory framework that accommodates the unique characteristics of digital assets.

The outcome of this legal battle will likely have significant implications for the cryptocurrency industry as a whole, as it could set a precedent for how cryptocurrencies are regulated in the United States.

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Coinbase, the largest cryptocurrency platform in the United States, has announced its intention to request the dismissal of a lawsuit filed against it by the U.S. Securities and Exchange Commission (SEC).

The lawsuit alleges that Coinbase violated the law by failing to register its business.

In a letter submitted to the Manhattan federal court just before midnight on Wednesday, Coinbase argued that the SEC lacks the authority to pursue civil claims because the assets traded on its platform do not fall under the category of “investment contracts” and, therefore, should not be considered securities.

According to Coinbase, the SEC can only pursue its claims if the tokens and staking services in question are classified as securities, which the company asserts they are not.

As of now, there has been no immediate response from the SEC regarding Coinbase’s argument.

The SEC initiated the lawsuit against Coinbase on June 6, accusing the platform of making billions of dollars by acting as a middleman in the trading of at least 13 crypto assets or tokens, such as Solana, Cardano, and Polygon, that should have been registered as securities.

Apart from the alleged securities violations, Coinbase also faces legal action over its “staking” program.

This program involves pooling crypto assets to support blockchain network activity, with customers receiving rewards in exchange for their participation while Coinbase takes commissions.

The SEC’s legal action against Coinbase came shortly after its lawsuit against Binance, the world’s largest cryptocurrency exchange.

The SEC accused Binance of inflating trading volumes, mishandling customer funds, and providing false information about its operations.

SEC Chair Gary Gensler has been actively asserting jurisdiction over the cryptocurrency industry, claiming that it has undermined investor trust in U.S. capital markets.

In a separate filing disputing the SEC’s claims, Coinbase stated that it welcomes regulation but believes the regulator is overstepping its boundaries and attempting to fill a “regulatory gap” without the necessary authorization from Congress.

Coinbase argued that the SEC’s actions in this case exceed its authority and are therefore unlawful.

Following the news of Coinbase’s response, shares of its parent company, Coinbase Global, experienced a 2.2% increase, rising by $1.58 to reach $72.33 during afternoon trading on the Nasdaq.

The lawsuit against Coinbase is officially known as SEC v Coinbase Inc et al, and it is being heard in the U.S. District Court for the Southern District of New York under case number 23-04738.

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Coinbase, the leading American cryptocurrency exchange, has taken a strong stance in its legal battle against the United States Securities and Exchange Commission (SEC) by filing a motion to dismiss the SEC’s complaint.

The motion, submitted to the U.S. District Court for the Southern District of New York on Thursday, June 29, raises concerns about the SEC’s interpretation of securities laws, suggesting that the agency is overstepping its legal authority.

In its bid to challenge the SEC’s lawsuit, Coinbase’s legal team argues in the motion that even if the allegations in the lawsuit are true, the plaintiff lacks a valid legal claim.

The filing asserts that the SEC’s actions not only violate Coinbase’s due process rights but also constitute an extraordinary abuse of process, demanding dismissal of the case.

Coinbase’s determination to defend its position against the SEC’s claims is evident in this motion.

The SEC’s lawsuit accuses Coinbase of facilitating unregistered trading of 12 digital tokens that the agency considers securities.

However, Coinbase has strongly contested this allegation, asserting that the SEC is applying securities laws to digital tokens in a manner that deviates significantly from existing legal frameworks.

Paul Grewal, Coinbase’s chief legal officer, expressed this sentiment in a tweet on June 29, stating that the SEC’s claims “go far beyond existing law” and should be dismissed accordingly.

The SEC’s definition of securities encompasses investment contracts, which have been interpreted by the Supreme Court through the Howey test to include transactions where individuals invest money in a common enterprise with the expectation of primarily profiting from the efforts of others.

The SEC’s lawsuit identifies 12 crypto tokens, such as Solana, as securities based on this definition.

Coinbase’s legal team also highlighted that in 2021, the SEC had declared the company’s registration statement effective, allowing Coinbase to sell its shares to investors during its public listing.

This approval came after a thorough review process involving extensive discussions between Coinbase and the SEC, spanning several months.

Consequently, Coinbase was authorized to trade over 240 tokens on its spot exchange, including six of the 12 tokens currently disputed by the SEC.

By filing this motion to dismiss, Coinbase continues to challenge the SEC’s lawsuit and its interpretation of securities laws.

The outcome of this legal battle will not only impact Coinbase’s operations but also shape the regulatory landscape for the broader cryptocurrency industry in the United States.

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SEC Commissioner Pushing For ‘Reserved’ Approach to Cryptocurrency Regulation

Cryptocurrency laws in the United States should adopt a “reserved” approach and avoid regulating the technology solely from a financial perspective, according to a commissioner at the U.S. Securities and Exchange Commission (SEC).

Commissioner Hester Peirce, often referred to as “Crypto Mom,” shared her views during her remote appearance at Australian Blockchain Week on June 29.

Peirce emphasized the need for regulatory frameworks to acknowledge that cryptocurrencies have applications beyond the financial realm.

While crypto is often associated with financial assets, Peirce highlighted its potential in facilitating decentralized interactions, such as in social media platforms.

She argued that any legal framework should be flexible enough to accommodate the evolving uses of crypto and blockchain technology, while still providing clarity that enables experimentation.

Taking a subtle jab at the SEC’s current approach, which has received criticism from various quarters, Peirce cautioned against delayed enforcement actions resulting from an inflexible regulatory framework. She suggested that regulations should strike a balance between being reserved and offering sufficient clarity, allowing individuals and businesses to explore new possibilities in the crypto space.

When asked about her advocacy for cryptocurrencies, Peirce expressed her belief that the SEC can improve its approach.

She emphasized the importance of being able to speak openly and questioned the purpose of her position if she is unable to do so.

Peirce viewed cryptocurrencies as an opportunity for the SEC to reevaluate its approach to innovation, asserting that the current regulatory stance is inadequate.

Referring to the recent collapse of FTX and subsequent allegations of misconduct, Peirce encouraged the crypto industry to embrace self-regulation.

She stressed the significance of addressing counterparty risks, conflicts of interest, and leverage.

While acknowledging that these steps should ideally be taken without government intervention, Peirce also recognized the potential role of government regulators in this process.

In summary, Commissioner Hester Peirce called for a reserved approach to cryptocurrency regulation in the United States.

She emphasized the need to recognize the broader applications of crypto beyond finance and cautioned against rigid regulatory frameworks. Peirce advocated for a regulatory environment that encourages innovation while still providing clarity.

Furthermore, she encouraged the crypto industry to undertake self-regulation and pay attention to risk factors, suggesting that government regulators could play a supportive role in this endeavor.

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