Equity traders bear the cost of US crypto executions

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Hello and welcome to the latest edition of the FT Cryptofinance newsletter. This week we take a look at how the SEC is funding crypto enforcements.

It is no exaggeration to say that the Securities and Exchange Commission, the main market regulator in the United States, is busy with cryptocurrencies.

The name the SEC won this year would have rivaled most of the industry’s Hollywood A-lists a year ago. Do Kwon from Coinbase, Kraken, Gemini, Genesis, Terraform Labs, and many senior executives from FTX are on board. Binance US tried to stop it from buying assets from bankrupt lender Voyager Digital, but a judge ruled against it this week.

The agency’s approach has frustrated many in the cryptocurrency industry, who say regulators have not clarified the rules. I’m a little annoyed because

“Their funding comes from stock and options investors. These crypto people are running amok and burning the world down, funded by me and funded by my clients.” Our agency, the SEC, has to spend time on crypto, stock trading firm Themis Trading tells us.

He points to parts of the Securities Exchange Act of 1934. This law, albeit old, is the cornerstone of American stock trading today.

Section 31 details a small fee that all brokers must pay to the US government to pay regulatory fees. It is taxed on the value of the stocks and options traded and essentially out of the broker’s profits unless the broker transfers it to the client.

Regulators base their fees on how much they need in their annual spending budget. This is usually a function of the amount that the US Congress is ready to give.

Rate brokers have to pay the bounce.At the beginning of 2021 it was $5.10 per million dollars. It then surged to $22.90 per million dollars before returning to $8 in early 2023. Until now, it has been spent keeping order among regulated companies and brokers.

However, self-funded crypto regulators are no newbies. Good luck trying to get money from companies that are shy about their headquarters locations and how much of their deals are genuine.

“The last thing you want to do is create a dedicated agency to police every new financial product that comes out,” said Dennis Kelleher of Better Markets.

From a distance, America’s regulatory system looks incredibly complex, with regulators at the federal and state levels vying for jurisdiction. But the SEC stands out. It was created (yes, part of the same Stock Exchange Act of 1934) to protect investors in the American capital markets, and its broad powers are a feature, not a bug. .

The obvious answer would be for Washington to increase its budget. “FTX exploded and all these US politicians who took money from FTX tried to cover their tracks by calling for a crackdown on cryptocurrencies . The thing is to give the SEC a surge of resources soon,” Kelleher added.

However, the chances of that happening are close to zero. SEC Chairman Gary Gensler may be a divisive figure on the Capitol, but budget restrictions are probably the same as another personality representing the SEC.

Complaints about regulatory funding have caused brokers to discard every cent they have pulled out of their pockets, and many SEC chairmen have decimated the authorities themselves, just as sheriffs have arrived to clean up the Wild West. is as old as Equity traders must continue to fund market cleanups whose standards are almost unbelievable.

What do you think about the relationship between the SEC and cryptocurrencies? Email me your thoughts scott.chipolina@ft.com.

Weekly highlights:

Let us flag the FT’s new 30-minute FTX movie featuring Nikō Asgari, Katie Martin, Josh Oliver and who you really are. If you’re new here, it’s especially helpful to appreciate FTX’s short and chaotic lifespan.
In the spirit of International Women’s Day, we spoke to Aoife Keane, Felicity Potter, and Amy Harvey, partners of crypto-focused law firm Ontier, to find out how women can join the traditionally male-dominated blockchain party. asked what he needed. The commission told me that greater regulation of cryptocurrencies would promote more equal employment practices and even allow for a playing field.
Silvergate became the first regulated bank to be caught in last year’s cryptocurrency frenzy. We decided that “the best way is for the bank to liquidate voluntarily,” and we plan to scale back our operations. The crackdown on crypto deposits has been destabilizing as customers have become concerned about the banks themselves. “We are seeing what happens when banks become overly reliant on risky and volatile sectors like cryptocurrencies,” said Sherrod Brown, chairman of the U.S. Senate Banking Committee.
Speaking of the U.S. crackdown on cryptocurrencies, the New York Attorney General’s office on Thursday filed a lawsuit against cryptocurrency exchange KuCoin, alleging that the exchange was selling and selling cryptocurrencies in the state. Claimed it was not registered as a dealer or commodity broker-dealer. of New York. KuCoin said it “has not yet received any legal documents regarding this incident” and will “address this matter through legal means if necessary.”

Soundbite of the Week: Perpetual Motion

John Ray had a lot to say about FTX’s former management when he parachuted in to bankrupt the cryptocurrency exchange and its affiliates. Trying to reclaim what’s left, he’s channeling his anger at others in the industry.

This week, FTX’s sister trading business, Alameda Research, sued crypto investment firm Grayscale and parent company Digital Currency Group over their massive Bitcoin and Ethereum trust structures.

If Alameda can redeem the trust’s 28 million shares and Grayscale can lower its administrative costs, the stake is worth double, at nearly $600 million, Wray estimated. But Alameda doesn’t, and neither does Grayscale. The lawsuit alleges that Grayscale and his DCG management were “controlled by self-interest” and created a “permanent one-way fee machine.”

“In fact, the trust’s usury fees have no commercial justification. I just did. “

Grayscale described the lawsuit as “misguided.” You can read Nikou Asgari’s article here and his November article on DCG Chiefs here.

Data Mining: Binance’s Market Dominance Reaches New Heights

Binance, the world’s largest cryptocurrency exchange, has gone from strength to strength since FTX went bankrupt last November.

Still, the speed at which it is engulfing other listed markets is breathtaking. Binance eats up over 60% of the spot market, not to mention 60% of the derivatives market.

As we noted in last week’s edition of this newsletter, there are key risks to the purportedly decentralized cryptocurrency market. This is an industry virtually managed by one company and his one man, the chief of Binance, his Changpeng Zhao.