First there was the crypto winter, then the fraud claim by FTX founder Sam Bankman-Fried, and now the lawsuits. Last week, the US Securities and Exchange Commission sued the world’s largest cryptocurrency exchanges, Binance and Coinbase, escalating tensions between the government and a volatile industry marred by scandals and market crashes.

Binance and Coinbase are said to be breaking the law by operating as stock exchanges without registering their businesses with the SEC. Binance, along with the CEO, is facing additional allegations that client funds were diverted to a separate business, among other allegations. Recently, the SEC asked a federal judge to freeze the assets of the American platform Binance.

The lawsuits are the latest in the ongoing battle between government officials describing the crypto industry as the “Wild West” and digital asset creators trying to legitimize cryptocurrencies as the currency of the future. Industry leaders say they are sending a clearer signal with their recent actions from US regulators that they are determined to ensure that cryptocurrency has no place in the traditional financial system.

And leading regulators are more openly expressing their views on the merits of cryptocurrency. “We don’t need any more digital currency … we already have a digital currency – it’s called the US dollar,” SEC Chairman Gary Gensler told Bloomberg on Tuesday.

The consequences of the legal battle could significantly reduce the growth of the crypto industry or, conversely, limit the scope of the SEC’s regulatory powers.

Federica Pantana, an SEC attorney at Davidoff Hutcher & Citron in New York, is watching and now speaking clearly about cryptocurrency clients: crypto assets need to be securities and the platforms that exchange them need to accept it.”

According to Pantana, whether crypto-trading companies decide whether it makes sense to register with the Securities and Exchange Commission or quit the business entirely will determine the industry’s forward outlook. According to him, the consequences of the legal process can lead to the bankruptcy of some companies.

The crypto industry already knew it was under intense scrutiny by regulators and politicians in Washington. The collapse of cryptocurrency prices last year and the closure of several leading crypto companies, including FTX, resulted in billions of dollars in losses for investors. Gensler has repeatedly stated, both in Congress and publicly, that he believes the SEC has too much power to regulate the industry.

Treasury Secretary Janet Yellen told CNBC on Wednesday that she “strongly supports” the SEC in using the tools it has to protect consumers and investors.

Despite increasing scrutiny from regulators, the crypto industry expected Congress to eventually step in and help legitimize the industry with new laws. Last year, Democrats and Republicans passed several bills that would put cryptocurrency under the control of the Commodity Futures Trading Commission and standardize the assets these products can hold, making other products, including stablecoins, more legitimate.

Yellen said Wednesday that she “sees some loopholes in the system that I think would be appropriate for additional regulation, and we would like to work with Congress to see additional legislation.” Crypto lobbyists now believe these laws are more urgently needed to stop the SEC from pushing their cases.

The most appropriate legislation is RN.C., who chairs this panel. It sits on the House Financial Services Committee chaired by its representative, Patrick McHenry. The legislation was co-sponsored by Glenn Thompson of D-Pennsylvania, chairman of the House Agriculture Committee.

McHenry said in a press release that the proposed bill aims to limit agencies’ jurisdiction over certain digital assets and “strike an appropriate balance between protecting consumers and promoting responsible innovation.”

The new legislation will give digital asset issuers exemptions from securities laws if they meet certain conditions and will, among other things, exclude digital products and payment stablecoins from the definition of securities under the securities law.

“Congress has no choice but to move forward thoughtfully with the law to clear up this mess,” said Christine Smith, CEO of the Blockchain Association.

Periann Boring, founder of the Chamber of Digital Commerce, one of the leading lobbyists in the cryptocurrency industry, said that the SEC’s lawsuits against Binance and Coinbase were “arbitrary and capricious” and that “the SEC’s strong actions in this area are politically motivated, that they are legal against the SEC. poses a risk”.

He said Gensler’s public comments on the benefits of cryptocurrency on the traditional financial system go beyond his role as the SEC’s head of consumer and investor protection.

“They’re not a merit regulator,” Boring said.

SEC and White House officials did not respond to the Associated Press’s request for comment.