Former advisor to the US Securities and Exchange Commission (SEC), J.W Verret, has characterized opening a probe into several major cryptocurrency exchanges as a “serious mistake”.
SEC has threatened regulatory action against Coinbase and others, with Coinbase one of the largest entities in the sector that could come under a serious probe.
SEC is poised to launch its investigation which Verret believes will be damaging to everyone.
“The SEC’s position – that most tokens are securities and must register or face enforcement – is obtuse. It’s also an approach that works to the benefit of the scammers and hucksters who have abused the crypto space”, he wrote in the Wall Street Journal.
He called for SEC to think twice and urged lawmakers to seek and rethink the federal securities law as innovation demanded it.
The 1933 Securities Act which is today’s binding piece of legislation, is not a fitting document to regulate the Digital Age, Verret continued in his criticism.
Verret pointed out that there are many differences between how mainstream and cryptocurrency businesses operate and that is why it would be impossible for crypto firms to comply in the first place.
Instead of punishing the biggest players, SEC should be focused on developing a regulatory regime that is tailored to the needs of crypto investors, the professor urged.
He noted that there are risks and challenges in pursuing crypto companies essentially arguing that Coinbase can be investigated by SEC, but bad actors and fraudulent projects probably couldn’t.
“When cases are brought against legitimate enterprises, such as Coinbase, that’s a good thing. When brought against fake projects that steal crypto, it isn’t”, Verret wrote.
SEC is still investigating Ripple Labs and trying to win a case against one of the biggest crypto companies out there. Opening a second front against Coinbase this time could do the industry more harm than help consumers.
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