Following the recent announcement of a settlement with ShapeShift, Hester Peirce and Mark Uyeda, commissioners of the U.S. Securities and Exchange Commission (SEC), have publicly criticized the agency’s unclear policy on cryptocurrency enforcement.
Peirce and Uyeda released a detailed statement on March 5 highlighting the ShapeShift case as a harbinger of broader problems with the SEC’s management of digital assets.
The commissioners said: “The enforcement action taken by the Commission against ShapeShift is the latest installment in a serial drama of the Commission’s ill-conceived cryptocurrency policies .”
ShapeShift’s $275,000 settlement with the SEC
The Securities Exchange Commission recently concluded its proceedings against cryptocurrency platform ShapeShift and approved a $275,000 settlement. The agreement followed allegations that ShapeShift offered unregistered securities to its customers.
ShapeShift, based in Denver, Colorado, listed at least 79 crypto assets. The SEC deemed some of them unregistered securities, using the Howey test as a benchmark for the determination.
Under the terms of the settlement, ShapeShift is required to pay a civil penalty within two weeks of receiving the decision. In addition, the company has agreed to a cease and desist order that will prevent any subsequent violative practices.
“The Securities Exchange Act defines a dealer as “any person engaged in the buying and selling of securities.” . . for his own account through a broker or otherwise” – the statement reads.
The Commission’s statement said that “crypto assets in ShapeShift’s offering included those that were offered and sold as investment contracts and therefore securities,” confirming that ShapeShift meets this definition.
The commissioners said that the SEC did not specify which of the 79 assets traded by ShapeShift are considered investment contracts, nor did it provide any rationale for its decision.
Regardless of the long time that has passed since ShapeShift’s inception and the change in its business model, Peirce and Uyeda said that ShapeShift must face the consequences. This is because the SEC accused ShapeShift of violating an unspecified subset of these assets in the form of investment contracts without providing a clear justification.
Commissioners said the standards are so opaque and arbitrary that the Commission itself is unwilling to stop with its own analysis. “The environment we have created for the crypto asset market, especially with regard to secondary trading, is unsustainable.”
“Such cases do not protect investors; they intimidate innovators and entrepreneurs. We respectfully object,” Peirce and Uyeda concluded.
