Using courts for every crypto issue will squash innovation: Grayscale CEO

Grayscale Investments CEO, Michael Sonnenshein, highlighted a potential negative outcome for the United States economy if the Securities and Exchange Commission (SEC) continues to take a one-by-one approach to regulating the cryptocurrency industry.

During a recent interview with Fox Business, Sonnenshein expressed that the SEC could drive crypto firms out of the country by constantly resorting to enforcement actions against the industry.

“If every crypto issue needs to go to a court of law, then as a country, we are squashing the innovation taking place here,” Sonnenshein stated.

Sonnenshein reiterated the industry needs distinct definitions for crypto commodities and crypto securities, as well as clearer regulatory guidelines for stablecoins. 

He believes this will prevent businesses from relocating outside the U.S. Sonnenshein stated:

“Adding further clarity to this would ensure that companies and people working on crypto don’t leave the U.S. because our regulatory environment is hostile towards the asset class but instead embraces it.”

Likewise, Ripple CEO Brad Garlinghouse echoed similar comments prior to the ruling of Ripple’s partial victory against the SEC, which was decided on July 13.

On June 17, Garlinghouse expressed that the SEC is “looking to kill” innovation and the cryptocurrency industry in the U.S. He noted that Ripple’s lawsuit conclusion is just the start of many other cases.

“Ultimately as our law suit comes to a close, for so many others its just starting, so the fight for clarity has to continue,” Garlinghouse stated.

Related: SEC decision on Bitcoin ETFs won’t leave out Wall Street giants

Sonnenshein remains optimistic about U.S. Congress’ ongoing efforts to provide regulatory clarity for the industry.

“A lot of this legislation that this congress could very well pass, could give the industry the actual clarity it needs to move forward in a way that embraces crypto” Sonnenshein stated.

On July 31, Cointelegraph reported that the House Financial Services Committee (FSC) approved the Financial Innovation and Technology for the 21st Century Act with a 35-15 vote.

The act aims to establish registration rules for crypto firms under the jurisdiction of either the Commodity Futures Trading Commission (CFTC) or the SEC.

While Sonnenshein is confident in Congress’ direction, he believes that the SEC should shift its focus.

He explained that the SEC assessing the wrong criteria when determining which Bitcoin ETF should be introduced to the market.

“When I think about the process that the SEC should be untaking here, it’s really not to pick winners and losers, it is to ensure that all the right disclosures are put out there for investors.”

On Aug. 11, the SEC delayed its decision on the outcome of the spot Bitcoin ETF proposed by ARK Investment Management.

After its publication in the Federal Register, the SEC initiated a public comment period for the ARK 21Shares Bitcoin ETF.

This marks the most recent postponement in the regulatory decision-making process regarding the acceptance a spot crypto ETF in the U.S.

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