SEC and CFTC spread fear among bitcoin companies operating in that country. Cryptocurrency companies in the U.S. have been the target of regulatory persecution.
US Regulators and the Upcoming Crypto Storm. Rostin Behman, chairman of the U.S. Commodity Futures Trading Commission (CFTC), warned this week that along with the bull market in bitcoin (BTC) and cryptocurrencies will come a regulatory storm for companies in the sector, which will be subject to upcoming enforcement actions. Behman said this during the Global Conference at the Milken Institute in Los Angeles, USA. In his opinion, another cycle of measures and actions by regulatory offices against the cryptocurrency sector “in the next 6 to 24 months” is foreseeable.
“Despite what happened in 2022, here we are with a growing market, growing capital, growing market capitalization. I think renewed interest from many entrepreneurs,” the executive said. “And, from my point of view as a regulator, we will probably see in the next 6 to 18 months or 6 to 24 months, another cycle of enforcement actions,” he added. Those actions will respond to the “digital asset appreciation cycle,” referring to the bull market and the high interest of retail investors.
Crypto Regulatory Framework
Notes Behman that “without a regulatory framework, without transparency, without tools that we normally use as regulators, you’re going to continue to see this fraud and manipulation and putting legitimacy aside.” “We just have to think about things from a regulatory and consumer protection standpoint, and I think that should be our guiding light,” he said.
Behman’s comments come amid a new U.S. crackdown on companies in the cryptocurrency sector. The Securities and Exchange Commission (SEC) sent a Wells Notice to the well-known Robinhood platform for violating federal securities laws by offering services with crypto assets. In a court filing, Robinhood Markets indicated that its cryptocurrency subsidiary, Robinhood Crypto, was the subject of the SEC flagging. Wells’ notice usually precedes enforcement actions by that regulatory office.
“On May 4, 2024, Robinhood Markets received a ‘Wells Notice’ from the SEC staff, indicating they had informed the company that it had made a ‘preliminary determination’ to recommend that the SEC bring an enforcement action for alleged violations of the Securities Exchange Act of 1934,” the U.S. company says in its filing.
The Wells Notice sent by the SEC to Robinhood is the second issued in less than a month and against companies in the Bitcoin sector. The Securities and Exchange Commission sent the notice to the decentralized exchange Uniswap. These SEC actions are part of the U.S. crusade against companies in the bitcoin and cryptocurrency sector, which seems to be getting longer, as CFTC Chairman Rostin Behman predicts.
The SEC and the CFTC denounced the world’s largest cryptocurrency exchange, Binance. The accusation led to charges against its former CEO, Changpeng Zhao, and sentenced him to four months in jail. It also led to multimillion-dollar fines against the company.
Robinhood Disappointment
Dan Gallagher, chief legal officer of Robinhood Markets, expressed his displeasure with the SEC’s Wells Notice. “We are disappointed that the agency has decided to issue a notice related to our U.S. cryptocurrency business,” he said.
“We strongly believe that the assets listed on our platform are not securities and look forward to engaging with the SEC to make clear how weak any case against Robinhood Crypto would be both in fact and law.”
Dan Gallagher
Robinhood recalled that, in the past, they have stopped listing specific tokens and offering certain products such as loans and staking services, considering that the SEC alleged that these represented securities in public shares. In June last year, Robinhood stopped offering support for the crypto assets Cardano (ADA), polygon (MATIC), and Solana (SOL,) identified as securities in the SEC’s lawsuits against exchanges Binance and Coinbase.
They sent the Wells Notice after the SEC subpoenaed Robinhood several times regarding cryptocurrencies listed and traded on the platform and for its custodial service and other distinct operations. Through all of this, Robinhood alleges, the company “has been cooperative.” They caution, however, that in the face of Wells’ Notice, civil injunctive relief and public administrative or cease-and-desist proceedings are likely to be issued.
“Remedies including injunctive relief, an order for disgorgement, pre-judgment interest, sanctions, and censure, revocation, and limitation of activities may also be sought,” Robinhood warns.
Arrests of bitcoiners in the United States
As part of the regulatory persecution in the United States, in addition to the companies already mentioned, there have been interventions to entities and even arrests of bitcoin industry referents. Two weeks ago, the founders and creators of Samourai Wallet got arrested by the U.S. authorities and accused of, among other things, allowing money laundering through this platform.
Then, the FBI warned users of using Bitcoin exchanges without the know-your-customer (KYC) protocol and warned of possible monetary losses in case of a raid. Because of all this, a sense of uncertainty has developed among companies in the cryptocurrency market, which have chosen to make accommodations to avoid being subject to regulatory prosecution. In addition, some created a narrative about a real war on privacy in the United States. The situation led to intense debates among ecosystem leaders, who agreed to preserve Bitcoin’s privacy and anonymity.