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The U.S. Securities and Exchange Commission undermines the legitimacy of cryptocurrency oversight and warns the regulatory body.
The U.S. Securities and Exchange Commission faces severe criticism from Better Markets for sidelining the rulemaking process in cryptocurrency oversight, raising concerns about the failure of transparency and investor risks.
The U.S. Securities and Exchange Commission is accused of undermining public accountability through informal cryptocurrency policies.
The organization "Better Markets", a nonprofit concerned with reforming financial markets and protecting the public interest, submitted a comment letter to the U.S. Securities and Exchange Commission (SEC) on June 11, criticizing the approach of the cryptocurrency working group in policy-making. The group urged the SEC to abandon its reliance on guidance documents issued by its staff and return to a more rigorous framework for rulemaking.
The letter claims that recent guidelines regarding cryptocurrencies lack transparency, public input, and formal accountability, stating the following:
We urge the cryptocurrency working group to move forward with the rulemaking process through notice and comment.
"Peter Markets" pointed to statements made by SEC Chairman Paul S. Atkins on June 3, when he reaffirmed his commitment to rulemaking, as evidence that the current approach diverges even from the agency's own stated principles.
Benjamin L. Shefrin, the Director of Securities Policy at "Peter Markets", expressed concerns that the SEC's informal process hinders democratic participation and fosters unbalanced regulatory outcomes. He added: "The cryptocurrency working group does not seem open-minded. It appears to be only seeking to keep the SEC away from any intervention in the cryptocurrency space." The use of guidance documents facilitates the cryptocurrency working group's ability to do so without constraints, as it does not need to respond to any public comments. The group also warned that "guidance documents, like those issued by the cryptocurrency working group, avoid procedures aimed at facilitating public participation in the regulatory process." These criticisms have been linked to broader concerns regarding investor protection and the legitimacy of regulatory frameworks.
"Peter Markets" cited the SEC's statement from February regarding meme coins as a key example of the risks of this approach. The SEC's assertion that meme coins are not securities, but "collectibles", has faced sharp criticism. The group emphasized:
The SEC's guidance on meme coins is extremely shocking, as the working group acknowledges that meme coins are speculative, experience significant market price fluctuations, and are often accompanied by statements about their risks. These characteristics do not make meme coins appear as "collectibles" like artworks, stamps, or baseball cards.
The organization concluded by stressing the risks of bypassing notifications and comments: "The SEC must remember that using guidance documents undermines the legitimacy of rules produced by removing even the pretense of public access and participation." Peter Markets advocated for formal rulemaking to restore public trust and ensure fair oversight in the cryptocurrency sector.
