The Securities and Exchange Commission came out strong this week, filing lawsuits against both Coinbase and Binance, the largest crypto exchanges in the world. The SEC’s accusations center around unregistered security violations and may end up impacting the United States’ role in the digital economy, according to several representatives in the bitcoin space.

For example, Jesse Shrader, CEO and Co-Founder of the bitcoin startup Amboss, told me in an interview that Congress “has failed to keep pace with innovations happening in the cryptocurrency ecosystem.”

Shrader added that SEC chief Gary Gensler is applying outdated legislation through enforcement actions on the largest companies in the global crypto industry, all while failing to provide clarity on their interpretations of existing laws.

Meanwhile, Congress is debating how to reduce the SEC’s power by clarifying that the Commodity Futures Trading Commission has more authority to regulate exchanges. Luckily for bitcoin-only companies, both the CFTC and SEC have clarified that bitcoin is a commodity, not a security. Even so, Shrader said that bitcoin companies are now looking to domicile elsewhere because of the actions of the SEC this week. Strike and Fold, two bitcoin companies, announced last month that they would be expanding their headquarter offices into El Salvador.

On the other hand, Steven Lubka, Managing Director at Swan Bitcoin, a bitcoin financial services firm, told me in an interview that there are numerous crypto assets that Coinbase listed “which appear by any conventional analysis to be securities for quite some time.” He added that the development was “unsurprising.”

Lubka said the lawsuits are “focused on the sale of unregistered securities and the non-separation of broker dealer and custodian functions.” Lubka added that the separation of custodians from brokers is the “gold standard in traditional finance, but is a structure few crypto exchanges operate under.”

Either way, even bitcoin-only companies are taking note of the SEC’s approach to communicate primarily through litigation. The SEC’s actions this week are a sign that the agency is taking a more aggressive stance towards the cryptocurrency industry.

Though bitcoin companies remain largely unscathed, so far, the SEC’s failure to provide pathways to cooperate without punishment may cause offshoring. In the long run, this leads to less regulatory oversight of this industry, diminishing the United States’ role in what many see as the future of the world economy.

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