By now, everybody knows that Arise Bank was raided by the FBI and all of their assets were seized by the SEC and placed into receivership. I wholeheartedly agree with Stan Larimer when he said: “Arise stakeholders were gravely and universally harmed by the authorities, not by Arise.”
But the point I want to emphasize is that the Arise contributors were not the only ones gravely harmed by the SEC’s asset seizure. The victims of this injustice are all of us: the entire cryptocurrency community and anybody that might one day be interested in cryptocurrency. This action and the underlying policies that enabled it discourage innovation, wealth creation, and progress.
However you feel about Arise Bank’s offerings and their ICO is really not the point. The reality is that the American legal system is not equipped to handle cryptocurrency and as a result, is stifling the growth of blockchain technology. Through the government’s attempts to “protect” citizens from ICOs like Arise Bank (that in some cases might in fact be scams or bad investments), they have actually cut Americans off from contributing to and benefiting from innovation.
It’s hard to fathom the amount of wealth that will not be created because of this toxic regulatory environment. Of course, Americans won’t be able to create great new cryptocurrencies, which hurts the entire ecosystem. Moreover, Americans won’t be able to profit from future ICOs or support their growth. This won’t stop innovation outside of America, but it will certainly stop Americans from benefiting from it and contributing to it. Most ICOs already don’t allow Americans to contribute because of the regulatory risk. A bad situation has been even made worse by the SEC’s action.
In a recent interview, Brock Pierce explained that EOS isn’t allowing American participation in their ICO because the United States accounts for only 15 percent of ICO investment but 99 percent of the legal risk. Brock’s statement is staggering and really quite sad. This begs the obvious question: why would an ICO ever launch in the United States or allow contributions from Americans? The answer is also obvious: they won’t. It’s just not worth it. Especially after Arise Bank, ICOs will want nothing to do with America.
As strange as it might sound, I don’t blame the SEC for taking the actions that it did against Arise Bank. Their job is to enforce the law as they interpret it. They deserve the benefit of the doubt that they really do consider AriseCoin to be a security and as a result, took action which they are authorized to take. The problem is not the SEC itself, the problem is that they were empowered to do this in the first place. The fundamental issue is that lawmakers haven’t embraced the innovative power of the blockchain, in part by allowing the SEC to treat cryptocurrency as a security. Which it clearly is not.
There is no legal framework in the United States for cryptocurrency to exist and flourish. So unfortunately, regulators like the SEC are legally allowed to take action against Arise Bank and other ICOs, applying archaic and outdated laws to something that nobody envisioned existing when those laws were created. Of course Arise contributors were harmed by the SEC’s action, but so was everybody else. Americans have effectively been cut off from benefitting, profiting, or contributing to a technological revolution that is happening everywhere else on the planet.
As the Arise Bank case works its way through the court system, the implications will be massive for the entire cryptocurrency community. As far as I know, this will be the first time a court has ruled on whether a cryptocurrency can legally be classified as a security, which would put ICOs and possibly all cryptocurrencies under the authority of the SEC. The merits of the Arise Bank project are not really relevant because this case will reach far beyond Arise. It will set legal precedent on whether cryptocurrency can be treated as a security, which will determine how it’s regulated. This will massively impact whether cryptocurrency is allowed to evolve in the United States or if it will be stifled and suffocated.
It is my sincere hope that leaders of the cryptocurrency community will come to the defense of Arise Bank’s founders and contributors. Not because they support Arise Bank, but because they support cryptocurrency in general. Personally, I am grateful for Stan Larimer’s leadership on this issue. It’s not too late for the cryptocurrency community to put our differences aside to encourage lawmakers to create a regulatory framework that makes sense and supports the growth of the blockchain. While it’s nice to see some state legislatures moving in this direction, this change needs to happen at a federal level for it to really matter. The cryptocurrency community needs to get organized and demand that Congress protect the blockchain. If that doesn’t happen, it might be too late for cryptocurrency in America.
