The cryptocurrency sector has been plummeting for months, although everything indicates that the worst is not over yet. And it is that the United States Securities and Exchange Commission (SEC) has taken action on the matter, putting the future of crypto in the market at risk. In just a few days, the regulatory body has already banned several mechanisms from some of the leading companies in this industry. However, what is truly worrying for all crypto defenders are the arguments that the SEC points towards some basic concepts and technologies tied to cryptocurrencies.
Everything comes due to his latest judgment against Kraken, a well-known exchange, which has agreed pay a fine of 30 million dollars and close its service of “staking“. Although at the moment it is only a decision that affects this company, the movement made by the SEC could set a precedent and proceed against all types of companies that offer security services. staking.
Another wake-up call for cryptocurrencies
the system of staking, powered from Ethereum 2.0, allows users to validate transactions based on their participation. Like a kind of dividend, but applied to crypto. However, the regulatory body aim because “users lost control”, they had “very little protection” and full information was not provided to investors.
As we said, the agreement carried out between the SEC and Kraken could set a precedent in the sector and now the conversation is directed to whether this could go further and whether companies should say goodbye to their security services. staking globally.
A few days ago, Gary Gensler, chairman of the SEC, explained in a video why the body is against this service provided by crypto companies and warns that, whether they are called “staking, APIs, loan services or rewards Remember, if you have a piece of cake for two and you cut it into three pieces, it’s still the same amount of cake.”
The ‘staking’ is a way to convert the user into an investor of the platform, according to the opinion of the SEC. This may be interesting for many, but it poses a risk if that platform goes bankrupt, something that we saw recently with the FTX scandal.
The agreement has resonated throughout the industry and the most visible faces of this business have not hesitated to give their opinion on it. That is why Brian Armstrong, CEO of Coinbase, has anticipated publishing an official statement on the matter.
For Coinbase, this “it would be a terrible path for the United States“. And it is that the crypto platform ensures that there are many products based on cryptocurrencies that offer staking services. In fact, Armstrong recalls that Coinbase also has this type of service, which it performs through Coinbase Earn. The latest data from the company prove that Coinbase earns just over 10% of its total revenue through this service.
Kristin Smith, CEO of the Blockchain Association, opines that “today’s agreement is not law, but it is another example of why we need Congress, not regulators, to determine the appropriate legislation for this new technology.”
The stablecoins are not saved either
The agreement with Kraken does not seem to have been the last movement of the regulatory body. And it is that as the Wall Street Journal points out, the SEC also would have acted against the financial institution Paxos, specifically in relation to one of the stablecoins it offers, Binance USD. the SEC ensures that it is an unregistered security.
The stablecoin, which is not issued directly by Binance, is backed with 1-to-1 dollars and is presented as a safe haven. In fact, we are talking about the third largest stablecoin in the world, with more than 6.2 million investors and a capitalization of $16.1 billion.
In this sense, the regulatory body seems not to want to go against stablecoins, but instead points to the fact that they have to be officially registered. On this topic, Jason Gottlieb, a cryptocurrency lawyer, it states that the SEC’s new position is that “all crypto projects should come forward and register.” But this is a problem for dozens of projects, since in his opinion, “when they get close, the only thing they get is a no from the regulator.”
Fear of financial collapse
The SEC does not appear to be the only government body against these types of practices. And it is that Christopher Wallet, governor of the Federal Reserve (FED), has warned that investors should not expect the government to take care of their losses. In this sense, he points directly against cryptocurrencies, which he compares to speculative assets such as baseball cards.
The Fed notes that it would not be surprising if the price of cryptocurrencies falls to zero, something that already happened with FTX, Luna or UST. And it is that, as the central bank of the United States points out, they have already detected a large number of scams and corrupt platforms in the crypto sector and they fear that this industry will end up corrupting the financial system, a sentiment that the European Central Bank also shared. .
Although these months have been very hard for the cryptocurrency sector, this may have only just begun.
Cover Image | Michael Fortsch