| The crypto market is already up more than 70% this year, but while day traders may be feeling good, the executives behind the digital-asset exchanges that serve them — particularly in the US — aren't. Coinbase CEO Brian Armstrong said he might consider relocating the headquarters of the biggest US crypto exchange unless the country changes its approach to regulation. That approach has been punctuated recently by a handful of Securities and Exchange Commission enforcement actions against digital-asset trading platforms, with Coinbase possibly next. Congressional Republicans and even fellow SEC commissioners are blasting Chair Gary Gensler for trying to force trading platforms to register while failing to provide a workable process — or clarifying the rules of the road. The reality is, Gensler has made his thoughts on crypto rules abundantly clear for months. The crypto industry may just not want to hear them. After all, following the rules would mean major cuts in profits. Gensler said as much at a congressional hearing Tuesday.
Gensler has repeatedly said that the majority of digital tokens are securities, but most crypto exchanges have made few adjustments in how they operate. On Monday, the SEC filed a suit against crypto exchange Bittrex, accusing it of, among other things, listing six tokens that were unregistered securities: OMG, Dash, Algo, TKN, NGC and IHT. While most of these coins are obscure, Algo and Dash are well known, and they also trade on Coinbase, which didn't return repeated inquiries about whether it plans to delist them. Earlier this year, Kraken stopped providing so-called coin-staking services in the US as part of a settlement with the SEC, which said the service through which crypto owners can earn yield constitutes an unregistered security. And yet other exchanges, such as Coinbase, continue to offer similar products, claiming they are different. In late March, Coinbase was notified by the SEC that it plans to bring an enforcement action against the exchange. The company has vowed to fight any action in court, if necessary. Eventually, the industry may have no choice but to acknowledge and adhere to the SEC's point of view, and all these cases may have huge implications for crypto exchanges. In the worst-case scenario for exchanges, as more and more coins are designated securities, many platforms may be left only able to trade Bitcoin — the one token the SEC has consistently deemed a commodity, and out of its purview. At a lesser but still financially painful extreme, exchanges may have to exit staking. They may also need to spin out some other businesses: In the Bittrex case, the SEC indicated it's not happy with crypto platforms performing functions of broker-dealers, exchanges and clearing houses, a gripe it also raised in its suit last month against Beaxy.com. While some of the SEC's positions may be successfully staved off in the courtroom, many others may set precedent. The regulator had previously dealt extremely effectively with initial coin offerings, which numbered in the thousands — and many of them had to exit the US or fold following the agency's smattering of actions. The SEC's complaint against Bittrex describes the decision-making process around whether to list a particular crypto asset as voiced by former CEO William Shihara in 2017: the problem is that its going to be seen by the SEC as a security. im meeting with these guys face to face to get specifics on how much they want to raise, who they are raising it from, and what they expect the after market to be.
its a big enough opportunity that we might want to roll the dice on the sec investigation. we have a couple of paths forward but one idea was to have them take a position in bittrex and own the risk of an SEC investigation with us.
As SEC complaints pile up, fewer exchanges will want to roll the dice. | 
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