Venture capitalist Tim Draper, the founder of Draper Fisher Jurvetson and Draper University, commented on the U.S. Securities and Exchange Commission's filing a barrage of lawsuits against leading cryptocurrency exchanges.
He argued punishing crypto companies before clear regulations are in place for the industry is un-American in a June 8 post on Twitter.
“Regulation by enforcement," Draper said on Twitter. "That is what they do in Russia. The SEC forgot that the USA is the land of the free. Our country needs to set clear boundaries and enforce them, not force litigation to decide how the rules work."
The SEC filed lawsuits against Binance and Coinbase last week, the largest crypto exchanges in the world and in the U.S., respectively, according to SEC news releases. The lawsuits allege Coinbase should have registered as an exchange with the SEC and accuse Binance of offering unregistered securities and permitting U.S. customers to use the global Binance platform, instead of restricting them to its U.S.-based platform, according to the SEC website.
In October, SEC Commissioner Hester Peirce asked Congress to pass a bill that could provide regulatory clarity in the crypto industry, Pensions and Investments reported. Peirce said that under SEC Chairman Gary Gensler, "We haven't really done anything besides bringing enforcement actions" in the crypto sector.
"We've issued some limited relief, but I think that relief is not expansive enough to allow some traditional players who are interested in this space to come in," Peirce said, according to Pensions and Investments. "I think it is a good time for legislation. It's up to Congress to figure out how they want to allocate the regulatory responsibility."
Former chief counsel for the SEC TuongVy Le, a partner and the head of regulatory and policy at investment firm Bain Capital, said earlier this year the SEC is trying to regulate “almost entirely through enforcement actions,” which she said is unhelpful for the crypto industry, CoinDesk reported.
“When the SEC tells us that something is not compliant, it’s not necessarily the same thing as telling us what they would consider compliant,” Le said, according to CoinDesk.
The week before the SEC's lawsuits against Binance and Coinbase, U.S. Reps. Patrick McHenry, R-N.C., chairman of the House Financial Services Committee, and Glenn Thompson, R-Pa., chairman of the House Committee on Agriculture, released a draft of a bill intended to provide clarity for and fill the gaps in the regulation of the digital asset industry.
The discussion draft includes amendments to the Securities Act of 1933 and the Commodity Exchange Act, which would add terms like "blockchain," "source code," "digital commodity custodian" and "digital asset issuer," according to a copy of the draft.
Binance responded to the lawsuit with a blog post, saying the company is “disappointed” the SEC has chosen this path, especially at a time when the industry is looking for more regulatory clarity.
"Unfortunately, the SEC’s refusal to productively engage with us is just another example of the commission’s misguided and conscious refusal to provide much-needed clarity and guidance to the digital asset industry," the post said.
In a response to the company's lawsuit, Coinbase CEO Brian Armstrong said, "We're proud to represent the industry in court to finally get some clarity around crypto rules," according to a post on Twitter.