Regulation
“You’re fucked” because you’re “a security”
Ethereal (ET) Co-founder Vitalik Buterin expressed his dissatisfaction with the way the United States handles cryptocurrency regulation.
In a recent interaction On Warpcast, Buterin said he believes the current regulatory system promotes the creation of projects that offer vague promises of profits with no real substance.
Buterin further argued that if cryptocurrency returns and rights are classified as securities, the focus should shift to developing tokens that maintain or increase economic value.
Furthermore, the Ethereum co-founder emphasized that this change requires sincere collaboration from both regulators and the cryptocurrency industry.
It all started on June 28, when an Ethereum Foundation member named Jason posted a reflection on a tweet Buterin made in 2022 during the debate over Sam Bankman-Fried’s proposed frontend regulation on Warpcast.
Source: Jason on Warpcast
In the tweet, Buterin has suggested several regulations on the frontends of decentralized finance (DEFI) platforms that could help reduce the number of opportunists in the sector and increase security.
They included limits on leverage, transparency about audits or other security controls on contractual code, and usage controlled by knowledge-based tests rather than minimum equity rules.
Sharing the post, Jason stated that he still believes in the value of Buterin’s proposed regulations and invited the Ethereum co-founder to share his current thoughts on the topic.
Jason also proposed the idea of a popup showing the current tokenomic breakdown of a coin before a trade, with links to Etherscan showing how major holders acquired their coins.
Responding to Jason on June 29, Buterin highlighted the fundamental problem of cryptocurrency regulation, particularly in the United States
He pointed out that projects that offer vague promises are allowed to operate freely, but those that provide clear disclosures about returns and rights are often classified as securities and face tougher regulations. He called this an “anarcho-tyranny” that is detrimental to the cryptocurrency space.
The main challenge with cryptocurrency regulation (especially in the US) has always been this phenomenon where if you do something pointless, or something where you ask people to give you money in exchange for vague references to potential returns, at best, you are free and clear, but if you try to give your customers a clear story about where the returns are coming from and promise what rights they have, then you are screwed because you are “a guarantee”
Vitalik Buterin, Co-Founder of Ethereum
Buterin also wants a regulatory environment where issuing a token without a clear long-term value proposition is riskier.
In his opinion, providing a transparent long-term perspective and adhering to best practices should provide security for crypto tokens. Achieving this goal, he noted, would require genuine commitment from both regulators and the industry.
Buterin’s comments come in the wake of a U.S. judge’s June 28 ruling dismiss the U.S. Securities and Exchange Commission’s (SEC) claim that Binance’s secondary sales BNB tokens are considered securities.
This ruling was influenced by the SEC v. Ripple case, where the economic reality of transactions was emphasized by applying the Howey test.
The judge ruled that secondary sales of Binance Coin are not considered securities, marking a significant victory for cryptocurrency traders.