Grayscale chief criticises SEC’s approach to cryptocurrency regulation

The U.S. Securities and Exchange Commission is lagging in regulating the crypto industry and pursues a one-dimensional approach to it, said Michael Sonnenshein, CEO of Grayscale Investments.

In a letter published by The Wall Street Journal, he noted that the agency’s policy did not help him protect investors from collapse of FTX. In this instance, the SEC only needed to resort to public warnings, lacking clear rules regarding crypto exchanges, Sonnenshein believes.

«The word “lagging” does not fully reflect the essence of what happened. The problem lies in the Commission’s one-dimensional approach to regulation through enforcement practices,» said the head of Grayscale.

He reminded that SEC rejected the company’s to convert the flagship Bitcoin Trust into a spot ETF. Sonnenshein called this regulator’s decision “baseless” in light of the approval of cryptocurrency futures-based ETFs. Grayscale disputed the Commission’s stance in court.

«The SEC’s inaction has hindered bringing Bitcoin into the regulated perimeter of the United States, often forcing American investors to use overseas trading venues with weak protections and oversight,» emphasised Sonnenshein.

In November 2022, amid the FTX collapse, rumors surfaced of liquidity problems at the parent company Digital Currency Group (DCG). Another subsidiary, Genesis Global, halted withdrawals and issuing loans.

In January 2023 the crypto lending platform filed for bankruptcy.

Earlier, Bernstein analysts suggested that for resolving DCG’s financial problems they could liquidate the Grayscale Bitcoin Trust.

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