Expert: SEC’s war on crypto just getting started

• Marcus Sotiriou, a market analyst at UK-listed digital asset firm GlobalBlock, says the SEC is just starting in its crackdown on crypto.
• The analyst said this in a note to clients on Monday following regulatory moves against crypto firm Paxos and the stablecoin BUSD.
• Sotiriou says crypto wants clarity, yet the SEC has so far failed to provide the guidance needed. 

Paxos news undoubtedly impacted markets on Monday as cryptocurrencies largely traded lower. While other market factors could have been at play, one of the negative triggers was reaction to news about Paxos and the stablecoin BUSD.

Bitcoin retreated to test support at $21,500 and Ethereum dipped to lows of $1,470, while Binance’s BNB fell below $300 to a new one-month low. The declines that also pushed the total crypto market capitalization down by more than 2.5%, came as US regulators appeared to shift another gear in their “crackdown” on crypto firms.

GlobalBlock analyst on SEC’s war on crypto: it’s “just starting”

Marcus Sotiriou, a market analyst at digital asset broker GlobalBlock, says the orders against Paxos from the New York Department of Financial Services (NYDFS) and the US Securities and Exchange Commission (SEC) suggests regulators’ war on the crypto sector has only just begun.

The analyst’s comments in a note to clients on Monday pointed to NYDFS’s order stopping Paxos from minting new BUSD and SEC’s reported lawsuit against the same firm over allegations that BUSD is an “unregistered security” as an indicator of what’s likely to come.

As for the regulator’s latest actions, Sotiriou says the accusations are not just “off the mark” but also baffling.

“The actions of the SEC appear to be way off the mark. They have labelled BUSD a security, yet hard pegged stablecoins have no expectation of profit and have a fixed price, like stored value Gift Cards,” the analyst wrote.

The SEC’s reported suit against Paxos follows last week’s announcement that the crypto exchange Kraken had reached a $30 million settlement with the agency and that the platform had agreed to halt its staking-as-a-service product.

“People are desperately trying to figure out how to offer a product legally whilst getting zero guidance,” the analyst noted. 

In his opinion, US regulators have so far failed to provide regulatory clarity for the crypto sector. Instead, the SEC is increasingly taking the “regulation by enforcement” route as shown by the 42% jump in crypto-related lawsuits in 2022.

According to the analyst, the growing number of lawsuits against crypto firms in the US suggests the SEC’s war on the sector is just starting. However, this could be at the risk of pushing crypto innovation offshore, he added.

Indeed, Binance CEO Changpeng Zhao says this could be the case for the exchange if BUSD is declared a security. 

“Given the ongoing regulatory uncertainty in certain markets, we will be reviewing other projects in those jurisdictions to ensure our users are insulated from any undue harm,” the Binance chief tweeted on Monday.