While crypto and Web3 have been disrupters in the technology and finance industries its true disruptive power is coming to light in a whole different location that I do not think many saw coming. Over the last few months, it has become more and more apparent to me that the biggest disruption that we are seeing is showing up between Congress, the duly elected officials by the people, and the bureaucratic heads of government agencies that are beyond the people's control. The issue of regulators operating beyond their mission and going rogue has become an alarming issue on both sides of the aisle in Congress.
There are several examples of this from the IRS launching in-depth reviews on taxes of people Former President Trump had fired while still in office to the EPA overstepping its role that the Supreme Court recently struck down. Calls have also increased on the SEC and how it is operating. Last week at a Financial Services Committee hearing the Deputy Enforcement Officer stated that the agency is sending out "voluntary" letters to people and companies beyond their scoop for specific information. If they do not receive the information they want they begin to look for ways to launch an official investigation into the person or entity an appalling practice, to say the least. If you are like me you would think that if they are doing this then they would have their own house in order yet it is becoming apparent that that is not the case and this recently announced Coinbase insider trading case highlights its shortfalls.
Before we even get to the heart of the case, we must first step back and look at Coinbase as a company as a whole. Coinbase is a publicly traded company and a publicly traded company falls into the jurisdiction of the SEC. When Coinbase decided to go public as a company, the SEC went through all of their books and checked everything out to make sure everything was legal. While doing this they also sorted out and labeled what was what in the company. How things were listed and labeled results in different accounting and auditing practices. During this time the SEC itself CHOSE and LABELED these cryptos as ASSETS. At the time they were not labeled as securities which brings us to the current issue at hand.
Yesterday when the SEC announced the first case of people being charged for insider trading by tipping off friends about coin listings the SEC also issued a new document that was and still is critical to the case. It changes the designation of at least 9 assets to securities! Now before I continue we need to address the elephant in the room. What was done was wrong, criminal, and should be punished because the Coinbase bump at the time was a HUGE thing that would send a coin's values flying in a matter of seconds once it came out. However, upending what they had already signed off on and specifically targeting certain aspects of the industry and firms involved including DeFi is just flat out the wrong way to approach the issue. Below are the 9 assets that are now considered securities. From this list as well three were even featured in the EARN program!
- Power Ledger’s POWR token
- Flexa’s AMP token
- Rally’s RLY token
- DerivaDEX’s DDX token
- XY Labs’ XYO token
- Rari Capital’s RGT token
- Liechtenstein Cryptoassets Exchange’s LCX token
- DFX Finance’s DFX token
- Kromatika Finance’s KROM token
With these draconian decisions by the SEC, I will now have to revise what I have talked about the last couple of weeks when I dismissed the rumors of crypto legislation actually occurring this session. With the "CHIPS" Plus Act moving forward Congress might just take up this issue as a way for both sides to try and score some additional political points before voters head to the polls. If the industry continues to get attacked and the SEC continues its rogue operations it makes it a piece of cake for both sides. Add in that the market has recovered pretty well the last week and the topic is more important to younger voters who serve as a key voting block both sides could move to a quicker resolution to tame the SEC and codify basic things into law.
While I have no idea what is going to happen going forward this is a bad look for the SEC and the reports and comments coming out of hearings are equally concerning. The SEC has struggled mightily this last year and a half handling their basic duties. Let's not forget the boom and bust of the SPAC markets, trading issues caused by their rules and regulations, and now they have made crypto a spectacle as well. Actions like this will get Congress's attention and this will end up leading to action.
Please know I am not a financial advisor and make sure you do your own research! If you enjoyed this article and would like to further support me below are a few referral links that if you used when signing up I would appreciate it! Also, follow me on Twitter @Cje95_
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