A wave of support for increased transparency in the crypto space is building, ignited by recent remarks from Gabriel Shapiro, General Counsel at Delphi Labs. In a contemporary twist on the traditional world of finance, Shapiro champions a “13D-style” approach to large crypto token holders. He suggests a level of disclosure similar to that required by substantial shareholders in the traditional stock market.
one of the few crypto KYC-ish things I agree with is the idea that very large token holders should have to identify themselves and what % of total supply they directly/indirectly own/control, like 13D-style
otherwise difficult to truly assess system security/centralization…
— _gabrielShapir0 (@lex_node) July 9, 2023
This argument arose from Shapiro’s concerns about the difficulty of assessing system security and centralization within the crypto sphere without adequate information about substantial token holders.
Crypto Transparency: A Shared Sentiment
John Deaton, a known XRP advocate and prominent legal figure, found common ground with Shapiro’s thoughts. Deaton agreed with Shapiro’s sentiment, given that the U.S. can achieve regulatory clarity.
Once we’re in a sane regulatory environment, I 💯 agree. @bgarlinghouse & @Ripple implemented the cryptographic escrow and started publishing #XRP Reports every quarter, identifying #XRP sales. The SEC, however, used all of this “transparency” against Garlinghouse and Ripple.… https://t.co/NHQyMISMB0
— John E Deaton (@JohnEDeaton1) July 9, 2023
Deaton praised the practices of Brad Garlinghouse, Ripple’s CEO, and the company Ripple for implementing cryptographic escrow. This technique and publishing regular detailed XRP reports have set an industry example for transparency. Deaton states:
“Once we’re in a sane regulatory environment, I agree. @bgarlinghouse & @Ripple implemented the cryptographic escrow and started publishing #XRP Reports every quarter, identifying XRP sales.”
However, Deaton expressed frustration over the U.S. Securities and Exchange Commission’s (SEC) response to Ripple’s transparency efforts. According to Deaton, the SEC took issue with Ripple’s practices, leading to an ongoing legal dispute.
Legal Tangles and the Ripple Effect
The SEC accused Ripple of making an unregistered securities offering via XRP sales, instigating a fierce legal battle. Deaton noted an intriguing exchange involving former SEC official William Hinman during these proceedings.
Hinman was questioned about whether the SEC had looked into the token ownership of Ethereum heavyweights, including co-founder Joseph Lubin, Vitalik Buterin, and Consensys. Deaton stated that Hinman confirmed the SEC had conducted due diligence regarding Ethereum during its assessment, although he could not recall the exact figures about token ownership.
Ethereum’s Regulatory Status: Gensler’s Standpoint
In related reports, Ethereum’s role in the SEC’s case against Ripple has been noteworthy. Despite the SEC declaring Bitcoin and Ethereum commodities in 2018, thus seemingly immune to regulatory scrutiny, this perception has been challenged in 2023.
SEC Chief Gary Gensler hinted at the possibility of Ethereum being classified as a security earlier this year. Gensler suggested that cryptocurrencies, except for Bitcoin, were developed and promoted by their development teams, implying they could be considered digital securities.
The Call for Greater Transparency
As the crypto industry matures, demands for increased transparency are gaining more traction. While this push encounters regulatory complexities and legal challenges, many stakeholders agree that clarity and accountability are necessary for the industry’s future growth and stability. With both Deaton and Shapiro backing enhanced KYC procedures for major crypto token holders, it’s clear that the push for increased disclosure is a topic of rising importance in crypto.