SEC's Approach to LBRY Crypto Token Criticized by Commissioner

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SEC’s Approach to LBRY Crypto Token Criticized by Commissioner

A Dissenting Perspective

After a legal battle that resulted in the SEC’s victory over LBRY, SEC Commissioner Hester Peirce chose to make her dissenting voice heard by publishing her statement on the agency’s public website.

The Aftermath

It wasn’t until the conclusion of a protracted legal dispute, during which the LBRY crypto company was found guilty of failing to register with the SEC, that Commissioner Peirce was able to express her thoughts on the matter. She initiated her statement by making it clear that she did not support the SEC’s decision to pursue the case against LBRY. She raised a fundamental question: Has the public truly benefited from the SEC’s enforcement action that led to the takedown of a “functioning blockchain with a real-world application”?

A Hardline Stance

Commissioner Peirce argued that the SEC had numerous alternatives to explore when it came to addressing fraudulent crypto projects. She asserted that the SEC found no evidence of fraud in the LBRY case but criticized the agency for adopting an excessively hardline approach. The SEC had sought $44 million in “monetary remedies” and rejected LBRY’s offer to burn all its tokens as a guarantee against future registration violations.

The Ambiguity of Securities Laws

Peirce emphasized the ambiguity surrounding the application of securities laws to token projects. She noted that despite the SEC’s assertions to the contrary, there is no clear path for a company like LBRY to register its functional token offering. In her words, “The time and resources we expended on this case could have been devoted to building a workable regulatory framework that companies like LBRY could have followed. Then the market could have decided LBRY’s fate.”

Disproportionate Actions

Commissioner Peirce characterized the SEC’s approach to LBRY as “completely out of proportion” to any potential harm suffered by token investors. She suggested that investors might have preferred the company to continue supporting the blockchain. She strongly criticized the SEC’s actions, stating, “The Commission’s action forced a group of entrepreneurs to abandon what they built. Our disproportionate reaction in this case will dissuade people from experimenting with blockchain technology, which LBRY aptly describes as ‘technology that enables dissent.’ A government of a free people should welcome dissent and the technologies that enable it.”

Looking to the Future

Commissioner Peirce concluded her statement by quoting a tweet from the LBRY team, projecting a future where citizens are imprisoned for using cryptocurrency rather than central bank digital currencies (CBDCs). She humorously envisioned herself tending to bees in 2028 rather than writing dissenting memos. She also admitted her lack of concrete solutions to prevent similar projects from enduring the same fate and encouraged public input.

Disclaimer: This article is provided for informational purposes only and should not be considered legal, tax, investment, financial, or other advice.