The SEC’s continuous crackdown on cryptocurrencies has drawn growing criticism, mainly targeted at its chairman, Gary Gensler. On April 21st, Paradigm, a venture capital firm focused on Web3, published a policy statement outlining its concerns with the SEC’s registration process.
Paradigm argued that Gensler’s attempts to integrate crypto assets that may not meet the criteria of ‘securities’ into an unsuitable disclosure framework are “misguided.” As a company that invests significantly in crypto and Web3 startups, Paradigm believes that the SEC is not providing adequate information to crypto asset users and investors.
The company stated:
“It fails to provide crypto asset users and investors with the information they need, while also denying crypto entrepreneurs a viable path to compliance.”
Paradigm contends that the disclosure policy developed in the 1930s is not suitable for the decentralized nature of cryptocurrency markets. The current policies were designed with centralized companies issuing securities in mind and did not consider the unique characteristics of crypto markets.
Paradigm also noted that while securities provide legal rights to holders against centralized entities, most cryptocurrencies only provide technological capabilities within a protocol and do not confer any legal rights.
The company consequently asked the financial regulator to update its existing disclosure policies to incorporate new technologies and asset classes. According to Paradigm, without significant revisions to the SEC’s current disclosure regime, the regulation of crypto asset markets by the SEC would be insufficient since these assets can operate independently of their issuer and function autonomously.
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