The Blockchain Association, a lobbyist group representing the U.S. cryptocurrency industry, has called for the removal of Securities and Exchange Commission (SEC) Chair Gary Gensler from overseeing regulations on the crypto sector. In an open letter, the association argues that Gensler’s public comments have demonstrated a lack of impartiality in approaching the issues at hand.
This statement comes in the wake of Coinbase, the largest U.S.-based cryptocurrency exchange, filing a notice of intent to request the dismissal of the SEC’s lawsuit against the company. The SEC had sued Coinbase, alleging that the exchange operated as an unregistered financial securities exchange and broker. Binance.US faced similar charges from the SEC a day prior.
According to Jake Chervinsky, the chief policy officer of the Blockchain Association, Gensler’s steadfast belief that all digital assets, except Bitcoin, are securities compromises his ability to make enforcement decisions with fairness and impartiality. Coinbase, in its filing, highlighted that the SEC was well aware of the exchange’s digital asset operations since its public offering registration in April 2021. Additionally, Coinbase pointed out that six of the twelve cryptocurrencies classified as securities by the SEC were already being traded on its platform when the agency reviewed the registration.
Blockchain Association joins Coinbase to challenge SEC regulations
Coinbase argued that the SEC’s position on its powers had changed, which the company deemed legally untenable. Coinbase further criticized the SEC’s enforcement actions as violating due process and the constitutional separation of powers.
The SEC has taken a more stringent approach to regulating crypto exchanges this year. It imposed a $30 million fine on U.S.-based crypto exchange Kraken for its crypto staking programs, citing the offering of unregistered securities. The SEC also warned Paxos Trust Company, the issuer of the Binance stablecoin, of potential legal action, leading the company to cease minting the stablecoin as the SEC deemed it an unregistered security.
Coinbase’s filing contended that the SEC had chosen to roll out its aggressive agenda through punitive retroactive enforcement actions instead of testing its new view through notice-and-comment rulemaking. Coinbase argued that the SEC’s actions went beyond its legal bounds and were unlawful.
While Gensler has received support from many Democrats for his actions against crypto exchanges, he has faced criticism from Republican congressman Warren Davidson. Davidson introduced a bill called the SEC Stabilization Act, seeking to restructure the agency and remove Gary Gensler as chair.
The tension between the SEC, crypto exchanges, and industry advocates like the Blockchain Association underscores the ongoing regulatory challenges in the cryptocurrency sector. The outcome of Coinbase’s request to dismiss the SEC’s lawsuit and the potential implications for Gensler’s role as SEC Chair remains to be seen.
