Ripple Counsel Says SEC Invitation is a Bait, Policy Head Slam Regulators For Pushing Innovation Out of US

Alderoty and Friedman say the need for clear crypto rules drives innovation outside the US.

Ripple’s general counsel Stuart Alderoty and Head of Policy Susan Friedman said the absence of clear rules for crypto is driving innovation out of the US. The general counsel at Ripple commented on a recent Bloomberg Law article, which analyzed the impact of the SEC’s legal battle against Coinbase.

Last week, Coinbase disclosed that it received a Wells Notice from the SEC, alleging that its staking product constitutes an unregistered security. While the SEC has not officially charged Coinbase, the exchange has reiterated its willingness to defend itself if the regulator takes things further.

Despite Coinbase’s determination to defend itself, Bloomberg Law, citing comments from industry and legal experts like Alderoty, said a lawsuit against the San Francisco-based exchange could put crypto survival on the line.

SEC’s Invitation is a Bait and Switch Trap

Alderoty said the Securities and Exchange Commission’s claim that crypto companies should “come in and register” is a “bait and switch trap.” According to Ripple’s general counsel, the securities regulator is fully aware that there is no path to registration. The agency focuses on using enforcement actions to bully and bulldoze responsible actors. 

The SEC’s continuous adoption of a regulation-by-enforcement approach shows that the agency is not interested in fostering innovation in the United States, said Alderoty. 

“Unfortunately, unelected bureaucrats are pushing that innovation outside the US where the rules of the road are clear,” he added.

Alderoty urged his followers to appreciate the resounding rebuke of the SEC’s invitation to crypto companies, asking them to come in and register. According to Ripple’s general counsel, the rebuke of the SEC’s invitation has been echoed by crypto experts over the years. 

He said legal experts have joined in rebuking the SEC’s invitation to crypto companies as they recognize the agency’s “jurisdiction overreach.” 

“Appreciate the resounding rebuke of the SEC’s claims of “just come in and register” from respected voices not just across crypto but also legal analysts now recognizing the SEC’s jurisdiction overreach,” Alderoty tweeted.

Appreciate the resounding rebuke of the SEC’s claims of “just come in and register” from respected voices not just across crypto but also legal analysts now recognizing the SEC’s jurisdiction overreach. https://t.co/WgWjnNxRK2

— Stuart Alderoty (@s_alderoty) March 27, 2023

In a tweet today, Susan Friedman, the Head of Policy at Ripple, echoed a similar view. Friedman noted that the lack of clear rules for crypto could change the narrative from whether the industry will leave the US to how soon such a move will happen.  

“It’s not a question of if industry leaves the US but how fast,” Friedman added.

While other jurisdictions have constructed entire frameworks to regulate crypto in the 4 years since @giancarloMKTS left the CFTC, the US is still struggling to answer the same threshold questions he faced as Chair. It’s not a question of if industry leaves the US but how fast. https://t.co/vDx5SUUOJw

— Susan Friedman (@ss_friedman) March 27, 2023

Friedman asserted that only a little progress had been made by the Commodity Futures Trading Commission (CFTC) in establishing clear regulatory frameworks for crypto.