SEC's crackdown on the crypto industry sparks backlash, Justin Sun returns to Hong Kong with TRON
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SEC's crackdown on the crypto industry sparks backlash, Justin Sun returns to Hong Kong with TRON
Since March, the U.S. Securities and Exchange Commission (SEC) and the U.S. Commodity Futures Trading Commission (CFTC) have launched investigations and lawsuits against multiple companies and founders in the cryptocurrency industry, with many companies choosing to settle.
Navigating Web3 tides with focused insightsSince March, the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have launched investigations and lawsuits against multiple companies and founders in the cryptocurrency industry, with many firms opting for settlements. In recent years, the crypto sector has consistently engaged with U.S. regulators to help develop a clear regulatory framework and detailed guidelines, but progress has been minimal. This year’s enforcement actions have unfolded under ambiguous regulatory policies, exhibiting extraterritorial reach and a perceived intent to stifle industry growth—sparking dissatisfaction and skepticism within the crypto community.
Although the CFTC has maintained a similarly stringent stance on cryptocurrency regulation as the SEC, the leaders of the two agencies hold differing views on key issues such as regulatory jurisdiction and how digital assets should be classified. In February 2023, SEC Chair Gary Gensler stated publicly that “all cryptocurrencies except Bitcoin should be classified as securities.” CFTC Chair Rostin Behnam opposed this view, asserting that ETH and stablecoins are commodities, not securities. While Behnam has expressed willingness to collaborate with the SEC to find common ground, he has yet to receive any legal guidance from the SEC on how to distinguish between commodities and securities.
Jake Chervinsky, chief policy officer at Blockchain Association, a U.S.-based nonprofit, also challenged Gensler’s position, stating that while Gensler may claim authority over the crypto industry, his “opinions are not law.” Unless the SEC can legally demonstrate its jurisdiction over each specific token, Chervinsky argued, it lacks the authority to regulate any given cryptocurrency.
In March 2023, the SEC announced it would sue Justin Sun, founder of TRON, and issued a Wells Notice to Coinbase, a publicly listed U.S. exchange. In early March, backed by the SEC, New York State Attorney General Letitia James filed a lawsuit against cryptocurrency exchange Kucoin, alleging that ETH, LUNA, and UST qualify as securities.
As reported by The Wall Street Journal in December 2022, the SEC intensified its enforcement efforts against cryptocurrency exchanges following the collapse of FTX. Prior to that, despite conducting investigations into parts of the crypto industry for over six years, the SEC had never brought legal action against a major crypto exchange.
The fallout from FTX’s collapse triggered a liquidity crisis at Silicon Valley Bank in early 2023, sending shockwaves through the U.S. banking system. Since then, U.S. regulators have launched coordinated, aggressive actions targeting the crypto industry—including actions against Justin Sun, founder of TRON; Changpeng Zhao (CZ), CEO of Binance; and a renewed focus on the long-running Ripple litigation.
Hong Kong-based media outlet Investing.com quoted Justin Sun describing the SEC's actions as "deliberate suppression." Mainland Chinese outlets such as Wall Street Info and Cailian Press noted that the cases involving Sun and Coinbase reflect a shift in the Biden administration’s attitude toward financial innovation following the Silicon Valley Bank crisis—marking what they describe as the SEC’s “declaration of war” on the crypto industry.
Why have U.S. regulators moved so aggressively and simultaneously? Industry analysts suggest that the U.S. government, unable to effectively tackle inflation despite multiple Federal Reserve rate hikes, is attempting to redirect capital from the crypto sector back into traditional finance. However, the total capital within the crypto industry remains negligible compared to traditional markets, rendering this regulatory strategy ineffective and misguided.
Rather than resolving regulatory challenges, the joint crackdown by the SEC, CFTC, and other agencies risks driving crypto businesses, talent, and capital overseas. In an exclusive interview with CNBC, Justin Sun emphasized that establishing a globally unified and transparent regulatory framework would best serve the long-term interests of the cryptocurrency industry.
Regarding the SEC investigation itself, Sun remained composed, responding in mid-March that the probe lacked factual basis. In an April 10 interview with the Financial Times, he reiterated, “Being charged by the SEC isn’t something you get used to, but it’s become fairly common.” He also noted that since Huobi does not operate in the U.S., the SEC litigation has no material impact on its business operations.
The day after the FT interview was released, Sun arrived in Hong Kong to attend the 2023 Hong Kong Web3 Festival, where he was warmly received and widely followed by industry participants, sparking extensive discussion on social media. Sun was invited to speak at multiple events including iPollo Metaverse Goddess Festival, Binance Night, Xinhuo Tech Conference, and the TRON-sponsored forum “METAVERSE Opportunities in 2023,” where he was frequently approached for photos, enjoying the reception of a “celebrity within the industry.”
Despite news reports on April 14 indicating that the SEC had served Sun with a subpoena, the Hong Kong crypto community—and particularly Chinese entrepreneurs—continued to express support and solidarity. Even amid ongoing pressure from the SEC, Sun’s presence in Hong Kong signaled his endorsement of the city’s development in blockchain technology and Web3.
The center of gravity in the cryptocurrency industry is visibly shifting from the United States to Hong Kong—a market where Sun and TRON have previously invested significant effort. This moment marks a symbolic “hero’s return,” witnessed jointly by Hong Kong and the global crypto community.
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