In 2023, following intensified pressure on altcoins from the SEC, Bitcoin's market share rose from 38% to 45%. The regulator only recognises Bitcoin as a "commodity", while it classfied other digital coins as "securities".
Since institutions are required to secure proper SEC licensing to trade securities, a pre-action letter (Wells notice) was served to Kraken, Coinbase, Paxos, and a raft of other organisations. Under this pressure, Kraken stopped providing staking services, while Paxos ceased minting BUSD for Binance. Coinbase is prepared to defend the interests of its clients in court, but has halted staking for Algorand, one of six coin services offered (more in this article).
The regulator's actions have been criticised more for the lack of specific detail than for unnecessary harshness. Consequently, Coinbase CEO Brian Armstrong noted that they had held more than 30 meetings with SEC officials, but are yet to hear concrete criteria for classifying one cryptocurrency or another as a "security".
The lack of transparency has resulted in several crypto companies already having ceased operations in the US, with the country's largest crypto exchange, Coinbase, yesterday reporting that it had secured an offshore registration to expand its business outside the jurisdiction of the US authorities.
This exodus of companies has resulted in severe capital outflows from the US, which is a particularly worrying event in light of the current pre-crisis conditions. For this reason, SEC chairman Gary Gensler was called before Congres's Financial Services Committee.
According to the record, congressmen interrupted Gensler's speech three times asking the direct question: "Is Ethereum a security?" To which Gensler each time answered ambiguously, demonstrating the regulator's ill-defined position.
The lack of an unequivocal approach to crypto regulation and the unfounded pressing of cryptocurrencies led Congressman Warren Davidson to petition Congress to consider the removal of Gensler for abuse of power.
With Gensler's departure, Etheruem will have the chance to make gains against Bitcoin by the end of 2023 as a change of SEC leadership will pave the way for a more equivocal approach in determining the status of altcoins.
StormGain Analytical Group
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