Two influential organizations in the cryptocurrency sphere, namely the Blockchain Association and the Crypto Freedom Alliance of Texas, have initiated legal proceedings against the US Securities and Exchange Commission (SEC). They argue that the SEC exceeded its authority by imposing a rule that redefines the criteria for determining a “dealer” of securities. This move, according to them, was arbitrary and violated the Administrative Procedure Act (APA).
Violation of Statutory Authority
The CEO of the Blockchain Association, Kristin Smith, condemned the SEC’s actions as a blatant attempt to unlawfully regulate beyond its mandated authority. Smith believes that the Dealer Rule is part of the SEC’s campaign against digital assets and is expanding its power unlawfully. She emphasizes that this rule could push US companies to relocate offshore and create fear among American innovators.
Both organizations are seeking to have the SEC’s Dealer Rule nullified by the court due to the regulator’s violations of the APA. They argue that the lack of clear communication and transparency in the rulemaking process hinders industry participants from operating with clearly defined rules.
Marissa Tashman Coppel, the legal lead at the Blockchain Association, pointed out the negative implications of the SEC’s rule on the digital asset ecosystem, particularly on Decentralized Finance (DeFi). She criticized the lack of clarity in the rule, stating that it affects liquidity providers, DeFi software, and developers. The new tests introduced by the rule focus on trading activity rather than on customer relationships, which deviates significantly from previous SEC interpretations.
Unaddressed Industry Concerns
Coppel highlighted that the SEC failed to address numerous concerns raised by industry stakeholders during the comment period. One major issue is the ambiguity in determining which crypto asset transactions qualify as securities transactions. This ambiguity makes it challenging for industry players to assess the need for compliance with the rule.
Industry Support
The Blockchain Association boasts an extensive membership base comprising major crypto companies like Coinbase, Kraken, Circle, and Ripple. These industry players are standing together to challenge what they perceive as overreach by the SEC and to advocate for a fair and transparent regulatory framework for the digital asset industry.