Why Cryptocurrency Companies Demand Clear Regulation from the SEC

The cryptocurrency industry is stepping up its fight for regulatory clarity with the U.S. Securities and Exchange Commission (SEC). Notably, the Crypto Council for Innovation (CCI), investment firm Paradigm, and the Digital Chamber of Commerce are supporting Coinbase in its legal action against the SEC.

Industry leaders call for clear regulation of the cryptocurrency sector.

The need for specific cryptocurrency regulations

Coinbase has been involved in a long-running dispute with the SEC over specific cryptocurrency regulations. Despite these efforts, the SEC has even filed lawsuits, arguing that existing securities laws are adequate.

This stance has led to legal conflicts with major cryptocurrency companies. Regulatory uncertainty has also led to companies considering relocating to more cryptocurrency-friendly regions.

“Industry participants seeking regulatory clarity are fleeing overseas to jurisdictions that provide regulatory guidance that the SEC refuses to provide,” CCI said in an amicus brief.

Read more: Cryptocurrency regulation: what are the pros and cons?

Moreover, CCI criticizes the SEC’s informal and inconsistent regulatory approach. In their view, this lack of formal rulemaking forces industry players to navigate a maze of informal guidance and conflicting legal precedents.

Likewise, the Digital Chamber argues that the SEC’s reluctance to establish clear rules harms the economy and violates legal principles.

As Paradigm points out, cryptocurrency assets operate differently than traditional securities. They thrive on decentralized networks without relying on centralized issuers. Current disclosure requirements designed for traditional securities do not capture the essence of the cryptocurrency industry.

They ignore the critical role of third-party developers and present a false picture of industry dynamics.

Amid these regulatory challenges, political activism in the cryptocurrency sector is gaining momentum. Tether in particular has significantly increased its lobbying spending. Last February, the Winklevoss twins donated $4.9 million to Fairshake, a cryptocurrency advocacy political action committee.

This political engagement aims to create a regulatory environment that fosters innovation and ensures consumer protection.

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As the 2024 election approaches, the cryptocurrency community, including leaders like Ripple CEO Brad Garlinghouse and companies like Coinbase and Kraken, is rallying behind pro-crypto candidates. The significant financial support for Fairshake highlights the industry’s commitment to influencing policies that favor a more cryptocurrency-friendly regulatory environment.