Michael Sonnenshein, the CEO of Grayscale Investments, has emphasized the importance of maintaining a balanced regulatory framework for the cryptocurrency industry in the United States, in order to foster innovation.

During a recent interview with Fox Business, Sonnenshein shared his concerns regarding the Securities and Exchange Commission’s (SEC) approach to regulating the crypto sector on a case-by-case basis. He warned that such an approach might drive crypto businesses away from the country due to excessive enforcement actions.

Sonnenshein expressed his belief that resorting to the courts for every crypto-related issue could stifle the ongoing innovation within the nation. He stressed that a more collaborative and clear regulatory approach is needed to ensure a conducive environment for the development of the crypto industry.

One of the key points Sonnenshein highlighted was the necessity of distinct and well-defined classifications for crypto commodities and securities, along with comprehensive regulatory guidelines for stablecoins. He asserted that such clarity would discourage companies from seeking more favorable regulatory environments abroad and instead encourage them to operate within the U.S.

This sentiment is echoed by Brad Garlinghouse, the CEO of Ripple, who made similar remarks before the recent partial victory of Ripple against the SEC on July 13. Garlinghouse had criticized the SEC’s stance for potentially hampering innovation and growth within the U.S. crypto sector.

Sonnenshein remains positive about ongoing efforts in the U.S. Congress to provide clearer regulations for the industry. He believes that legislative action could offer the much-needed clarity that would enable the crypto industry to flourish while adhering to necessary compliance standards.

The Financial Innovation and Technology for the 21st Century Act, approved by the House Financial Services Committee on July 31 with a 35-15 vote, is seen as a step in the right direction. This act aims to establish registration rules for crypto firms under the oversight of either the Commodity Futures Trading Commission (CFTC) or the SEC.

While Sonnenshein acknowledges the potential of Congress’ actions, he suggests that the SEC should reevaluate its focus on Bitcoin exchange-traded funds (ETFs). He suggests that the SEC should prioritize ensuring accurate disclosures for investors rather than choosing winners and losers in the market.

The recent delay by the SEC in deciding on the approval of the ARK 21Shares Bitcoin ETF further highlights the ongoing regulatory uncertainty surrounding crypto ETFs in the U.S. This delay marks yet another step in the lengthy decision-making process for introducing a spot crypto ETF in the country.”