Crypto Bombshell: SEC Takes Aim at Major Player! What's Next for Bitcoin?
SEC Sues Coinbase Over Exchange and Staking Program - What Does This Mean for Cryptocurrencies?
The Securities and Exchange Commission (SEC) recently sued Coinbase, causing the company's shares to plummet down 13%. This follows the SEC's lawsuit against Binance and its founder, Changpeng Zhao, just one day earlier.
The regulator alleges that Coinbase was operating as an unregistered exchange and broker while listing 13 assets on its platform, which were considered crypto asset securities.
Is Bitcoin next?
This begs the question, are they going to go after all cryptocurrency more specifically, Bitcoin? And the people that hold Bitcoin? Are they going to go after them next? It's hard to say at this point, but the SEC's actions suggest they may be preparing for a larger crackdown on the industry.
The SEC's Gary Gensler stated that these trading platforms, which refer to themselves as "exchanges," are committing a number of unregulated functions. He also alleged that Coinbase's flagship prime brokerage exchange and staking programs violate security laws.
Coinbase's response is that the SEC's reliance on an enforcement-only approach, in the absence of clear rules for the digital asset industry, is hurting America's economic competitiveness. Companies like Coinbase have demonstrated commitment to compliance and are willing to abide by any law that the SEC puts forth, but how can they abide by a law that hasn't even been discussed or is incredibly vague?
The bigger question here is, what does this mean for cryptocurrencies as a whole? Is the SEC just creating a mountain out of a molehill to have the ability to sue them? Or are they really trying to crack down on the industry?
The potential outcome of this lawsuit could be that the SEC makes crypto illegal. Of course, that doesn't mean that if you own Bitcoin, you're screwed. Still, there could be a considerable decrease in demand if the government were to ban or make cryptocurrencies illegal.
Ironically, the better Bitcoin does and the more adoption it has as a currency and a medium of exchange, the higher the probability that the government makes it illegal, because it's competing with the dollar. If it remains as a digital asset or digital gold, the probability is low that the government will go after Bitcoin.
The SEC's lawsuit against Coinbase is just one piece of a more comprehensive crackdown by the government on the cryptocurrency industry. While the outcome is uncertain, it's plausible that the government could try to make cryptocurrencies illegal if they become more widely used as a medium of exchange.
Ultimately, holding Bitcoin may be a viable option for those who want to hedge against the traditional financial system, and the best way to do so may be by keeping Bitcoin as a store of value, like physical gold (insurance), rather than trying to use it as a currency.
