SEC’s ‘one-dimensional’ approach is slowing Bitcoin’s progress: Grayscale CEO

According to the CEO of Grayscale Investments, the U.S. Securities and Exchange Commission’s (SEC) approach to crypto regulation enforcement has stalled Bitcoin’s (BTC) progress in the country.

In a letter published Jan. 23 in The Wall Street Journal, cryptocurrency asset management chief Michael Sonnenshein said he agreed with an allegation that the SEC was “late to the game” regarding crypto regulation and preventing FTX from going bankrupt, adding:

“Late” does not reflect what happened here. The problem is the Securities and Exchange Commission’s one-dimensional approach to regulation through enforcement.”

Grayscale is currently suiting the SEC for denying the conversion of its Bitcoin trust to a spot-based Exchange Traded Fund (ETF).

He clarified that the SEC “should certainly try to weed out bad actors”, but that it should not “interfere with efforts to develop appropriate regulation”.

The regulatory failure to prevent such bad actors from entering the crypto industry “prevented Bitcoin from entering the US regulatory perimeter,” Sonnenshein wrote.

This has forced US investors to use offshore crypto companies “with less protection and oversight,” he said.

“We are seeing the impact of SEC priorities playing out in real time – at the expense of US investors.”

Cointelegraph has contacted the Securities and Exchange Commission for comment.

Sonnenshein’s op-ed comes as Grayscale is suing the SEC for “arbitrarily denying” Grayscale’s plans to convert its Grayscale Bitcoin Trust (GBTC) into a mock ETF.

The SEC argued that Grayscale’s proposal did not provide sufficient protection against fraud and manipulation. Grayscale countered by saying that the SEC treated arbitrary spot-traded products differently from forward-traded products.

Grayscale is owned by crypto conglomerate Digital Currency Group (DCG), which is currently in financial trouble.

DCG also owns bankrupt Genesis Trading, which was sued by the SEC on Jan. 12 for allegedly selling unregistered securities.

Related: SEC Leaked Crypto Miners Personal Information During Investigation: Report

Over the weekend, John Reed Stark, a crypto skeptic and former SEC chief, denounced the term “regulation through enforcement,” calling it a “Bogus Big Crypto Catch Phrase.”

In a Jan. 22 post on Linkedin, he said the term was a “misguided, distracting attempt to tap into sympathetic libertarian and anti-regulatory mores,” calling it “utter nonsense.”

He argued that “Litigation and SEC enforcement are really how securities regulation works.”