Digital Chamber Slams SEC’s ‘Regulation by Intimidation’ Strategy

The issuance of a Wells Notice to Robinhood Crypto by the Quality Examination Council has attracted strong criticism from the Digital Chamber, a digital asset sector trade association. This is part of a chain of similar regulatory moves targeting cryptocurrency players, such as Uniswap and Consensys. The Chamber calls these actions an unmitigated overreach of the regulatory authority by the SEC, taking place without a clear congressional mandate.

One strategy Robinhood Crypto used in its regulatory engagement was to set up a special-purpose broker-dealer designed for its crypto operations. However, such a proactive approach notwithstanding, the Digital Chamber sees the SEC’s move to deliver a Wells Notice as a threat to the development and investor protection in the digital asset space.

Concerns Over SEC Legislative Overreach

The Digital Chamber has been active in the legislative process by submitting numerous amicus briefs to set clear regulatory lines for digital assets. They claim that the SEC’s actions are not on the same page as Congress’s ongoing legislative efforts to regulate the sector. This, they argue, represents not only an error in jurisdiction but also undermines the direction of legislation promoting transparency and growth in the industry.

The SEC’s aggressive regulatory approach is also considered paradoxical to its very duty to save investors. Focusing on critical segments of the digital economy, the SEC can part ways with innovative enterprises and put at risk the financial independence of millions of people interacting with digital assets. Consequently, the Chamber’s statement seeks immediate legislative action to address these jurisdictional issues and develop a more favourable regulatory environment for digital assets.

Calls for Congressional Involvement

In response to these regulatory challenges, the Digital Chamber calls for Congress to inquire into the SEC’s behaviour. They urge SEC Chairman Gary Gensler to testify and justify what they term a program of “regulation by intimidation.” This position is also supported by House Majority Whip Tom Emmer, who has criticised the SEC’s approach to digital asset regulation.

Some crypto lawyers have dubbed the continued issuance of Wells Notices to companies such as Robinhood, Uniswap, and Consensys a “carpet bombing campaign” against the crypto sector. They contend that this approach may overstretch the SEC’s powers and cause substantial operational and legal problems for the affected companies.

Industry Experts Raise Concerns

The issue of the SEC strategy has also been discussed among the top legal experts in the cryptocurrency industry. According to Jake Chervinsky, Variant Fund’s Chief Legal Officer, the numerous Wells Notices issued by the SEC are almost unmanageable and point towards intimidatory tactics more than enforcement. Rodrigo Silva-Herzog of Cooley LL” discussed the broadness of the SEC approach and commented that it might be reaching beyond its capacity and mandate.

Robinhood executives have also disputed the SEC’s accusations as part of their defence, claiming they are confident that the digital assets offered on their platform are not securities.

Concurrently, Adam Cochran expressed his concerns about the SEC’s approach to the X platform, pointing out that it discourages fintech innovation in the United States. Cochran states that the lack of clear guidelines and the SEC’s retroactive enforcement actions hampered investment and development in the American fintech sector.

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