For a while, there have been numerous criticisms of the SEC's extremities regarding crypto. Investors, enthusiasts and firms alike have lent their voices, the latest being Paradigm.
On April 21, the Web3 venture capitalist (VC) company publicized a piece detailing the problems with SEC registration.
The third instalment in the three-part report was a scathing outline of the SEC's failures and proof of how it has done more harm than good for the ecosystem in general.
The part III of the series highlighted the differences between securities and crypto assets and why both should not be treated as the same thing.
It said that Gary Gensler's "attempt to brute force crypto assets that may not even constitute 'securities' into an ill-fitting disclosure framework is bad policy."
Paradigm pointed out that the current disclosure policy was formulated in the 1930s, a long period from today. It argued that current policies are designed for centralized companies issuing securities but do not apply to the DeFi market, as they differ.
The piece compared the nature of securities with the technology and how the disclosure framework for both parties is distinct. More so, an attempt to lump both parties together is flawed.
For securities, the issuer has to disclose important information about the business as they are relevant to enable investors to make informed decisions.
However, for digital assets, such disclosures don't have a similar effect as they do not precisely reflect its unique qualities.
The latter market is different from the former market. Hence, it should have a regulatory framework "tailored to the unique nature of crypto assets."
An adequate regulatory framework should:
Paradigm emphasized that the SEC had tried to utilize securities laws for DeFi assets.
"Unsurprisingly, without major changes to the SEC's current disclosure regime, the SEC cannot effectively regulate crypto markets."
Also, the firm alleged that the SEC failed to empower investors and users with the required information which would be vital for trading.
Such shady behavior would inadvertently cause non-clarity in the market. It would also prevent them from having a viable path to law adherence.
Additionally, there were question marks on the nature of the registration of these assets. The SEC allegedly failed to provide "actionable guidance" on when, how, and what types of crypto transactions are securities transactions.
Conclusively, Paradigm talked about how "current disclosure requirements do not provide the right information about crypto assets." It continued that there is a need for significant adjustment and clarification of the disclosure framework to assist the market with the proper information it needs.
Crypto assets differ in every way from securities and therefore require different investor disclosure considerations.
To Paradigm, the SEC has failed to acknowledge this discrepancy between the two and has instead sought to smear crypto's name in scandalous campaigns.
In the long run, if such negative campaigns persist, the SEC would ultimately do more harm than good with their policies.
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