After accusing the U.S. Securities and Exchange Commission (SEC) of side-stepping standard rulemaking process in its lawsuit against crypto exchange Binance, venture capital firm Paradigm has intensified its attack on Wall Street’s top cop. While Paradigm acknowledged the existing regulatory gaps in the crypto industry, the firm said the SEC has no dominion over filling those gaps.
In an amicus brief filed in the SEC vs Binance lawsuit, Paradigm said, “Regulatory gaps exist in crypto, as the Chair himself has acknowledged in the past—only Congress can and should fill those gaps, not the SEC.”
The statement comes on the heels of Paradigm’s accusations that the SEC is overstepping its boundaries in its desperate attempt to police the crypto industry. In the amicus brief, Paradigm voiced concerns about the U.S. markets regulator’s get-tough approach to crypto, saying it could also impact other asset markets.
“That extraordinary and overreaching construction of the Securities Laws threatens the development of crypto technology in the United States and could destabilize other significant markets that are widely understood to be outside the SEC’s jurisdiction.”
Paradigm
Paradigm clarified that it is not an investor in Binance nor does it have direct financial interest in the outcome of the lawsuit. However, the venture capital firm says it wants to ensure impartiality when it comes to the interpretation of the securities law. Paradigm alleges that the SEC is trying to leverage the allegations it’s made against Binance to bend the law.
In an attempt to lay its dominion over crypto secondary markets, the SEC has slapped lawsuits on Binance and two other crypto exchanges, Paradigm said. This is despite the SEC Chair Gary Gensler himself admitting in his testimony to Congress that the agency lacked the authority to regulate these very secondary markets, saying, “the exchanges trading in these crypto assets do not have a regulatory framework.”
It should be the US Congress setting up a framework to regulate crypto assets and not the SEC, Paradigm noted while expressing apprehension that the regulator’s regulatory overreach could hinder US innovation.
Notably, the US ranks below India, Nigeria and Vietnam in the 2023 Chainalysis Global Crypto Index. An analysis of the index scores for each quarter from Q3 2020 to Q2 2023 across 154 countries shows that there’s been a market recovery in crypto adoption worldwide, but it’s still well below peak levels.
Paradigm is not alone: fear looms large in the crypto industry that the SEC’s actions can hinder blockchain innovation within the US. Last month, Ripple Labs co-founder and CEO Chris Larsen criticized the US government’s “hostile” crypto policy, which he claimed is hurting Washington’s position as a global blockchain leader.
Larsen’s remarks came after the Biden administration proposed new rules regarding the crypto tax reporting for brokers. Additionally, the US government seeks to impose a 30% tax on crypto mining activities.
