Former SEC Commissioner Paredes Concerned About Overreach in Crypto Regulation
Summary:
Troy Paredes, a former commissioner at the U.S. Securities and Exchange Commission (SEC), expressed concerns over the regulator's wide classification of digital assets as securities. He voiced his worries at the TokenizeThis 2024 conference, stating the SEC chair, Gary Gensler, had clear thoughts on the definition of security under the Howey test, but there were still jurisdictional issues to confront regarding digital assets. Paredes also highlighted the ongoing uncertainty among firms trying to comply with regulatory requirements and criticized the SEC's strategy of “regulation by enforcement” towards crypto firms offering services or tokens to U.S. residents. The SEC's actions have prompted legislators to try to limit the authority's control over digital assets.
Troy Paredes, a previous commissioner at the U.S. Securities and Exchange Commission (SEC) from 2008 to 2013, expressed concern that the authority could be extending its reach too far in terms of classifying digital assets as securities. He addressed his concerns during his speech at the TokenizeThis 2024 conference in Miami on May 9, commenting that Gary Gensler, SEC Chair, has provided clear insight into his interpretation of what exactly should be classified as a security under the Howey test. However, Paredes stated there remains a "jurisdictional issue" that the SEC must confront when it comes to digital assets. Paredes further stated, "if an asset doesn't qualify as a security, then it isn't subjected to federal securities laws or fall under the SEC's jurisdiction." He also voiced his belief that the SEC adopted an excessively broad approach towards defining a security under the Howey test.
Paredes, speaking at TokenizeThis 2024, raised another concern regarding how many inside and outside the SEC seem to concentrate more on classifying certain tokens as securities, while failing to address the necessary adjustments to existing regulatory frameworks for such digital assets. Firms aiming to meet regulatory obligations face considerable uncertainty, he added.
Accusations against the SEC for implementing a “regulation by enforcement” strategy targeted at cryptocurrency firms that offer crypto-related services or tokens to U.S. citizens have been prevalent. Legal actions have been initiated by the commission against Binance, Kraken, and Ripple, and there are hints of potential enforcement steps against Robinhood following a Wells notice.
In light of the SEC's activities, numerous legislators have responded, seeking to limit the authority's control over digital assets. On May 8, an SEC Staff Accounting Bulletin on banks' custody of clients' digital assets was contested with a resolution passed by a majority in the U.S. House of Representatives. In response, President Joe Biden expressed plans to veto this bill.
Published At
5/9/2024 10:45:00 PM
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