Regulation
The courts must rein in the SEC before it kills the cryptocurrency industry
Instead of issuing clear rules or restrictions, the SEC has created an environment where entrepreneurs and developers are left in the dark, writes Kristin Smith, CEO of the Blockchain Association.
Bloomberg News
The Securities and Exchange Commission has been engaged in a power grab for years, and too often its primary focus has been blockchain and digital asset sector. To an objective observer, the SEC is actively trying to kill innovation in blockchain technology, but not in the way you would think.
Instead of emitting clear rules or restrictions, has created an environment where entrepreneurs and developers are left in the dark, and where any company using this innovative technology could become the target of federal regulators. This approach not only gives shivers $3 trillion digital asset industryit also creates the real possibility of crypto companies moving offshore to countries with little or no consumer protection. This is bad for America. This is detrimental to innovation and economic growth. This is bad for the tens of millions of Americans who use digital assets. And that’s why we felt compelled to defend our industry and take on the SEC.
Last month, the Blockchain Association joined the Crypto Freedom Alliance of Texas file a federal lawsuit challenging the SEC’s most recent extension – the overly broad and vague expansion of the long-established Dealer Rule, which now extends to persons who do not in the least resemble a dealer – specifically, any person whose trading activity regularly has the effect of provide liquidity, even if this person has no customers.
For nearly a century, the definition of “retailer” has focused on the retailer’s services to customers. The SEC has overturned this long-established paradigm. Under the new definition, regardless of whether a customer exists, those who trade digital assets and, as a result, provide liquidity, and those who develop these software protocols are now in the SEC’s sights. This is true despite many transactions involving the use of automated open source software that is impervious to hackers, unlike a traditional human intermediary. That’s an untold number of innocent people who may now face an extreme and unnecessary regulatory burden or SEC enforcement action simply because of their association with the software.
Absent any legal action to quash the finalization and implementation of the rule, law-abiding digital asset market participants would be left to struggle. Not only will the regulatory burden of having to register as a dealer lead to a consolidation of market participants and greater market instability, but the unanswered threshold question of which digital assets constitute securities leaves participants unsure whether the rule applies in the first place to them. .
Ultimately, this rule will disincentivize people from providing liquidity in digital asset trading markets, which would lead to an unnecessarily undercapitalized and risky market. Discouraging market participation, especially by well-capitalized institutional investors, has been shown to increase volatility and concentrate the market’s ability to move among a small group of digital asset holders.
What could be more un-American than making a thriving U.S. industry less safe, more cumbersome, and riskier for consumers, while reversing decades of progress in democratizing financial access for all?
Last week, the U.S. House of Representatives voted overwhelmingly bipartisan to pass the Financial Innovation and Technology for the 21st Century Act – a symbolic vote that shows that Congress, not the SEC, should set policy . But until new legislation regulating cryptocurrency regulation is passed and signed into law, the courts remain our only recourse.
For the United States to remain the true global leader in technology and innovation, the SEC must get back to doing what it was designed to do: provide clear, concise guidance and oversight that allows companies to grow and prosper. The industry cannot continue to operate in a constant state of uncertainty and fear of regulation by enforcing rules that have not been adequately communicated or have been issued without fair and meaningful engagement with those most affected.
By failing to do so, it exposes us, as an industry and as a nation, to greater risk lose millions of jobsdraining irreplaceable human capital and diluting the promise and potential of American innovation.