Paradigm Drags SEC For Sidelining Proper Procedure In Binance Case

The legal dispute between the U.S. Securities and Exchange Commission (SEC) and Binance has taken an interesting turn after Paradigm, a popular cryptocurrency investment firm, criticized the SEC for allegedly circumventing standard rulemaking procedures. The debate highlights the industry’s continued regulatory issues and the examination of decentralized finance (DeFi) systems.

It was also gathered that Circle, the company behind the widely used stablecoin USD Coin (USDC), has joined the ongoing legal battle between Binance and the SEC. Circle’s involvement emphasizes that this legal dispute is important to the cryptocurrency ecosystem. Paradigm has disapproved of the SEC’s strategy in the case against Binance.

The investment company has pointed out that even while many assets in the bitcoin market are actively advertised and exchanged for profit, the SEC has not explicitly designated them as securities. According to Paradigm, the SEC’s actions in the Binance case lacked the openness and established rulemaking processes generally anticipated in regulatory enforcement because the regulatory landscape for cryptocurrencies is unknown.

SEC’s Strategy Of Choice Raises Concern As SEC-Binance Case Lingers

Concerns from different industry quarters have been expressed regarding the SEC’s strategy to regulate the quickly developing digital asset market due to the agency’s concentration on cryptocurrency exchanges and DeFi platforms that it feels may be operating illegally.

Recall that the SEC sued Binance in June, claiming that the exchange had broken the securities laws by allowing the trade of digital asset securities without first registering with the SEC. It is also believed that the involvement of Circle in the process brought a certain level of complexity.

Paradigm, in its amicus brief, released on the 29th of September, emphasized that many financial assets are currently being marketed, traded for profit, and not approved as securities by the SEC. The company went on to list some of them as fine art, silver, and gold. The company’s brief also stated that the fact that the value of assets can be appreciated doesn’t make it a security.

Critiques Wades In, Demands A More Simplified Regulation

Paradigm’s critique of the SEC’s strategy mirrors broader issues with regulatory uniformity and clarity within the bitcoin industry. Both sides are expected to present their respective positions and supporting evidence in the ongoing legal dispute between Binance and the SEC. Paradigm, in their permutations, emphasizes that the SEC is deliberately targeting many cryptocurrency exchanges like they are attacking Binance.

The company fears that the agency’s strong position against the cryptocurrency sector may grossly reshape the basic understanding of securities law in many important aspects. Paradigm has also shown a strong concern in SEC’s use of the “Howey test.”

The Howey test has been defined as the standard SEC depends on to decide if a transaction qualifies as an “investment contract.” The said Howey test originated from a 1946 lawsuit in the United States Supremes Court to decide a transaction qualifies for an investment contact or categorised under the securities laws. 

The agency’s Cryptocurrency Assets and Cyber Unit, David Hirsch, has earlier in the month said that the SEC will continue with their massive crackdown against any cryptocurrency exchange found wanting of disobeying the securities laws. Information also shows that the SEC has succeeded in delaying several spot Bitcoin exchange-traded funds (ETFs) by major cryptocurrency industry players, including BlackRock.