Blockchain Association is a trade association based in Washington, D.C. that represents various stakeholders in the cryptocurrency and blockchain industry, including technology startups, investors, and developers. The organization aims to advocate for policy and regulatory solutions that foster innovation and ensure the sustainability of the crypto and blockchain sector. Their efforts include lobbying for favorable legislation, providing educational resources to policymakers, and promoting a better understanding of blockchain technology among the public and government officials.
On April 23, Kristin Smith, CEO of Blockchain Association, detailed the reasons for their lawsuit against the U.S. SEC during an interview with Sonali Basak and Tim Stenovec on “Bloomberg Crypto.”
Background of the Lawsuit
Earlier that day, Crypto Freedom Alliance of Texas and Blockchain Association filed a complaint in the District Court for the Northern District of Texas, that challenges the SEC’s new dealer rule, which they argue expansively redefines who qualifies as a dealer. This rule, they argue, is particularly problematic for the cryptocurrency space, especially decentralized finance (DeFi), where intermediaries are replaced by software code, eliminating the traditional customer-client relationship. The association believes this redefinition could unjustly encompass individuals who trade on their own account.
Issues with the SEC’s Dealer Rule
Smith criticizes the SEC’s approach as vague and asserts that the rulemaking process ignored the crypto industry’s concerns. The association contends that the SEC’s actions violate the Administrative Procedure Act (APA), suggesting that the rule was enacted in an arbitrary and capricious manner. The lack of clarity and failure to address industry concerns during the comment period are central to their legal challenge.
Potential Consequences of the SEC’s Rule
Smith painted a grim picture of the potential impact of the SEC’s rule on the cryptocurrency market. She noted that the uncertainty created by the rule has led companies within the Blockchain Association to halt hiring and delay launching new products in the U.S. She believes that this environment stifles innovation and creates significant compliance challenges for market participants, many of whom, she argues, may not be able to meet the new requirements.
The Broader Impact on Innovation
The Blockchain Association hopes that their lawsuit, alongside another led by the Managed Funds Association on behalf of hedge funds, will slow the SEC’s enforcement of this new rule. They aim to compel the SEC to reconsider the rule’s impact on the unique aspects of cryptocurrency technologies and trading.
Final Remarks
Throughout the interview, Smith emphasized the need for regulatory clarity that accommodates the technological innovations within the cryptocurrency space. She expressed hope that the lawsuit would lead to a more favorable regulatory environment that supports innovation and growth within the industry.
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