September 25, 2022

No one will escape Uncle Sam’s wide sweeping net of crypto regulation, according to staff in Senator Cynthia Lummis’ office.

The U.S. Securities and Exchange Commission is investigating Coinbase, the nation’s largest exchange, and has also targeted global giant Binance, according to staff at Lummis’ office.

Both Coinbase and Binance have stepped back to appease regulators with the latter operating a separate division (Binance.US) with limited services to US customers.

Apparently, this is still not enough for the SEC, while the most crypto-friendly regulator, the Commodity Futures Trading Commission (CFTC), is more likely to adopt a non-enforcement and lawsuit-based approach.

Each US crypto exchange is in various stages of investigation by said SEC staff, according to a Forbes report on August 4.

Cryptocurrencies are not securities… yet

However, crypto assets are not yet officially classified as securities, so the SEC is technically operating outside of its jurisdiction.

That was echoed by Republican Sen. Tom Emmer, who said last month that the agency and its anti-crypto chief, Gary Gensler, “are willing to expand the size of the crypto enforcement division by using enforcement to unconstitutionally expand its jurisdiction.”

However, there is a glimmer of hope as the SEC urgently wants to resolve its dispute with the CFTC over cryptocurrency jurisdiction, according to the unnamed official.

“If the issue is not resolved domestically, lawmakers will have to get involved and that Congress is likely to side with the CFTC,” he said.

Two bills were recently introduced to give the CFTC more jurisdiction over cryptocurrencies, however, the official said there was less than a 50% chance that either would be passed this year. The Lummis-Gillibrand bill was filed on June 7, and the Digital Goods Consumer Protection Act was announced this week.

SEC warpath

According to a cryptocurrency exchange executive, several US exchanges have likely received Wells notices from the SEC as part of its enforcement effort. These are used to officially inform companies when action is to be taken against them. The unnamed executive also said these cases are separate from standard SEC proceedings.

Binance.US has already delisted an asset considered a security by the SEC this week when it dropped the AMP token.

The battle over the regulatory control of cryptocurrencies in America continues and is unlikely to end anytime soon, which only prolongs the uncertainty for companies trying to comply.

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