The crypto community has gone on the offensive, lambasting the US Securities and Exchange Commission (SEC) Chair Gary Gensler on social media websites for his crypto regulatory agenda. Their complaints mainly focus on the SEC’s legal action against crypto firms and platforms and attempts to classify cryptocurrencies as “securities.”

The situation reached a boiling point when the SEC designated six tokens, including Algorand, as securities in a lawsuit against the crypto exchange Bittrex.

Let’s unravel the sequence of events that triggered the crypto community’s backlash and what ensued afterwards.

Also read: GALA V2 Airdrop: Everything you need to know

Why Gary Gensler is under the crypto community radar?

Recently, the US SEC pressed charges against Bittrex and its co-founder, William Shihara, for allegedly operating an unregistered national securities exchange, clearing agency, and broker-dealer.

In the lawsuit, the SEC classified six tokens, namely OMG Network, Monolith, Naga, Dash, Real Estate Protocol, and Algorand, as securities. The regulator revealed that more crypto assets would likely be added to this non-exhaustive list in the future.

Following the Bittrex lawsuit, SEC Chair Gensler tweeted, “The crypto markets suffer from a lack of regulatory compliance, not a lack of regulatory clarity.”

This statement in particular triggered many members of the crypto community, who argued that the primary issue in the crypto space is a lack of regulation and not the other way around.

In an unexpected twist, several Twitter users pointed out a four-year-old video in which Gensler spoke highly of the Algorand project and its founder Silvio Micali.

In the video, Gensler referred to Algorand as a ‘great technology’ and that one could create Uber on top of it. Gensler has also been seen praising Algorand on multiple occasions since 2019.

However, once the SEC classified Algorand as a security, the crypto community accused him of hypocrisy. His blockchain courses on YouTube also resurfaced in the discussion, and one Redditor said that Gensler first gave the crypto community hope but eventually let it down with his recent moves and statements against crypto firms.

Some even went to the extent of suggesting the chair ‘deserted’ his position of authority for power and money.

In an SEC hearing on April 18, Representative Patrick McHenry clashed against Gensler and criticized the SEC for punishing crypto firms through regulations without providing a clear path to compliance.

Also read: Upcoming global crypto events that you can visit

He said that Gensler's approach towards digital assets is driving innovation overseas and endangering American competitiveness. Gensler also drew criticism from other US congressmen, who claimed that his crackdown on crypto has failed to bring stability to the virtual asset market.

Furthermore, McHenry pressed Gensler to provide a definite answer on whether Ether is a security under SEC regulation or a commodity under the Commodity Futures Trading Commission’s regulation. Gensler did not give a firm answer and instead stated that the matter “depends on the facts of the law.”

Last month, Ripple CEO Brad Garlinghouse slammed Gensler regarding the Ripple-SEC case, stating that Gensler dictates what is considered a security and not the legislation from which his agency derives its power. Garlinghouse called for elected officials in the US to take notice of this issue.

Despite the fact that the legal action involves Ripple, the company behind the cryptocurrency XRP, the outcome of the lawsuit could have ramifications for how other cryptocurrencies are classed by the SEC.

Prior to these events, Bittrex announced that it would close down its US operations by April 30 due to the regulatory environment and lack of clarity on rules. Bittrex might not be the only firm that will take such a drastic step.

Previously, Coinbase, a top US-based crypto exchange, which also received a Wells Notice from the SEC, expressed its willingness to leave the US if regulators did not provide more clarity about their approach to cryptocurrencies and digital assets.

Similarly, Kraken had to shut its crypto staking service for US customers and pay $30 million as a penalty to settle SEC charges.

Conclusion

Gary Gensler has come under scrutiny from both the crypto community and members of the US Congress for not providing clear rules for the crypto market while enforcing laws to clamp down on crypto platforms. Critics argue that applying outdated laws to modern technology is counterproductive and stifles innovation.

However, Gensler argues that the vast majority of crypto tokens are securities and that nothing in the crypto market is incompatible with securities law. Going forward, it will be interesting to see how such events unfold.

Also read: Ethereum Development Conference 2023: Everything you need to know