A trillion-dollar question is at the heart of the stalemate between the SEC and the crypto industry: should the SEC rules wiggle for crypto or not?
Yesterday, at the US House Hearing Entitled: “The Future of Digital Assets: Identifying the Regulatory Gaps in Digital Asset Market Structure”, this statement from Representative Ritchie Torres caught my attention:
It summarizes the situation well. On one side, Chairman Gensler continues asserting there is nothing new here with crypto, and the industry should line-up under the existing regulation. His latest absurdity invokes a dog-goldfish analogy to traditional-crypto financial market.
On the other hand, a conventional wisdom reasoning would tilt on acknowledging that cryptocurrencies and blockchain-based technologies usher a slew of innovative business models and capabilities that must be allowed to live and prosper, especially when conceived and deployed in the United States, the largest and most vibrant capital market and economy in the world.
We know well by now, the SEC has not been shy about updating rules: 52 proposed new rulings in the past two years, of which 46 have been already enacted. Sadly, instead of expanding the scope of these rules to give life and validation to crypto, they have been doing the opposite: tightening the noose on existing regulation in order to explicitly choke crypto innovation, and that adds insult to injury.
A picture is worth a thousand words. So, I’ll leave you to digest this diagram that says it all.
Where we are:
Crypto is innovating at the edges of current regulations. True, it is currently hovering outside some existing regulatory boundaries.
Where we could be:
Update / Clarify rulings to encompass crypto, while still leaving some room for innovation at the edges.
What the SEC is doing:
Tightening rules further to increase crypto exclusion. The SEC is updating some rules in the opposite direction, making it more difficult or impossible for crypto to comply.