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Peter Schiff Warns Investors Could Face Retroactive Fines in “SEC Power Grab”

Last Updated February 19, 2024 12:07 PM
Teuta Franjkovic
Last Updated February 19, 2024 12:07 PM

Key Takeaways

  • A US court has approved the SEC’s power to change who’s a “dealer,” worrying investors about new regulations.
  • Peter Schiff warns individuals might face fines if not registered under SEC’s broader “dealer” definition.
  • Crypto industry fears the revised definition hinders DeFi and innovation.

Economist and gold supporter Peter Schiff has expressed concern over the United States Securities and Exchange Commission (SEC) possibly redefining what is considered a security.

His warning comes after the US Appeals Court backed SEC’s power to single-handedly revise the definition of a dealer. As a result, private investors might face retroactive fines for their lack of registration.

Schiff Voices Alarm Over SEC’s New Authority to Redefine ‘Dealer’

Economist and known gold enthusiast Peter Schiff has voiced his apprhension following a decision by the US  Appeals Court that confirms the SEC’s  ability to alter the definition of “dealer” within its regulatory framework.

This ruling raises concerns about the potential broadening of the SEC’s regulatory scope and its implications for investors. In response, Schiff claimed highlighting the potential for increased regulatory oversight and the consequent challenges that private investors may face, including the risk of retroactive penalties for those not registered as dealers.

SEC Expanded ‘Dealer’ Definition, Sparks Concerns 

Earlier this month, the SEC implemented new regulations to classify certain major market participants as dealers. SEC Chair Gary Gensler, endorsed the move,  emphasizing the necessity for firms operating as dealers to officially register with the Commission. This move aims to bring more transparency and oversight to the financial markets. It could ensure significant actors comply with the established regulatory framework.

Despite the intended regulatory clarity, legal experts and industry insiders express apprehension regarding the impact of these changes, especially within the cryptocurrency and decentralized finance (DeFi) sectors.

Marisa Coppel, the Blockchain Association’s Head of Legal, highlighted  the challenges posed by the updated ‘dealer’ definition. She argued that it sets unfeasible standards for DeFi projects, fails to provide clear guidance for market participants, and threatens to stifle innovation within the digital asset space. These concerns reflect the broader industry’s unease about regulatory adjustments that could potentially hinder the growth and evolution of cryptocurrency and DeFi platforms.

Citing Overreach and Potential Market Impacts

Schiff expressed his views  about the SEC’s stance on Twitter on February 6. In the tweet, he questioned the authority of the SEC to independently alter the definition of a security dealer. He argued this would allow the agency to regulate entities not traditionally classified as security dealers without any legislative backing.

Schiff claimed this move was an overstep of the SEC’s jurisdiction. He argued the agency lacked the power to redefine “security dealer”. This would, he said, extend its reach beyond its legal remit. Schiff warned such actions were unconstitutional and would likely lead to higher trading costs and lower market liquidity.

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