As cryptocurrency enjoys an impressive performance in 2023, the industry in the United States is facing a severe regulatory crackdown led by Securities and Exchange Commission (SEC) Chairman Gary Gensler. This difficult environment is highlighted by Coinbase’s recent decision to sue the SEC, demanding the agency create new rules to govern digital asset regulation, including a framework for identifying securities among digital assets.
Coinbase’s chief legal officer, Paul Grewal, wrote that they do not take the litigation lightly, especially against a regulator. While some experts argue that the lawsuit may not succeed, it could help rally demoralized supporters of the cryptocurrency industry. This lack of morale was evident when billionaire investor Chamath Palihapitiya declared that “crypto is dead in America” following a series of regulatory actions against the industry.
There’s trouble lurking in here, and I don’t know what it is. Coinbase is not going to get the SEC to write rules from this lawsuit. It’s to make a statement.
But they hired Eugene Scalia to write it. Scalia is a powerhouse lawyer, very strategic, and very expensive. 1/ https://t.co/aUcHbVoPJ8
— Todd Phillips (@tphillips) April 25, 2023
The collapse of crypto exchange FTX last fall was a turning point that “cooled a lot of receptivity” to the crypto industry, particularly among Democrats. Rep. Maxine Waters, a top Democrat on the House Financial Services Committee, has withdrawn her support for a bipartisan bill regulating stablecoins after recent industry failures.
Although the Biden administration initially appeared more balanced in its approach to crypto, the Treasury Department has since focused primarily on the threats that crypto poses to government efforts to counter money laundering, terrorism financing, and other illicit activities. As a result, the optimism that stemmed from the executive order on digital assets has faded.
There are still some proponents of crypto within the administration, such as Commodity Futures Trading Commission Chairman Rostin Behnam. However, their efforts are overshadowed by SEC Chairman Gensler’s increasingly aggressive stance. Gensler has maintained that he is simply trying to protect investors and create a level playing field, rather than seeking to ban crypto outright.