Blockchain tried to embrace regulation, but the SEC is suing for violations.

On June 6, the chief legal officer of the cryptocurrency exchange blockchain, Paul Grewal, testified before the United States Congress, stating that blockchain has been compliant with regulations since its founding over a decade ago. Grewal also noted that the SEC allowed the company to become a public company in April 2021, making it unique in the crypto industry.

However, on the same day as Grewal’s testimony, blockchain was sued by the SEC for alleged securities law violations, with CEO Brian Armstrong stating that a Wells notice received prior to the lawsuit was not constructive. The company has promised to vigorously defend itself against the charges.

In a video released the same day, blockchain claimed that it had mentioned staking in its S1 report and filed with the SEC before its initial public offering. The company’s staking program is a major alleged securities violation in the SEC suit. Furthermore, the video claimed that blockchain had met with the SEC 30 times in 2022, asking for guidance, and filed a petition for rulemaking on staking in March.

Grewal pointed out in his congressional appearance that blockchain is not currently unregulated, as it is a registered money services business with the Treasury Department and blockchain Asset Management is a registered investment advisor with the SEC and a licensed designated contract market regulated by the Commodity Futures Trading Commission. However, despite its licenses in 45 states, 10 states issued a Show Cause Order against blockchain on June 6, giving the company 28 days to show why those states’ regulators should not issue a cease-and-desist order against it for securities law violations.

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