Earlier, I was browsing the reddit cryptocurrency board when I saw this post titled:
IRS says crypto is property. SEC says its a security. FinCEN says its money. They cannot legally ALL be true. The only thing that is 100% certain is that crypto defies classification -- so it's mostly likely an entirely new species of thing.
So what we have is a number of large US government organizations all classifying cryptocurrency as something that falls under their jurisdiction. Just like cryptocurrency investors, these government organizations also want in.
Ask yourself; Why do all these different government organizations want to regulate cryptocurrency? Why do they all think cryptocurrency is an asset that falls under their jurisdiction?
The answer is; Government departments are fighting to have cryptocurrencies under their jurisdiction simply so that their department can expand their oversight and receive more resources. Cryptocurrencies are perfect for mandating additional resources, until now there hasn't been any real opportunity for the likes of the SEC to expand their jurisdiction, of course there may have been a case here and there that they could argue for, however nothing on the scale of the cryptocurrency market.
Here is the SEC's statement on cryptocurrency:
A number of these platforms provide a mechanism for trading assets that meet the definition of a "security" under the federal securities laws. If a platform offers trading of digital assets that are securities and operates as an "exchange," as defined by the federal securities laws, then the platform must register with the SEC as a national securities exchange or be exempt from registration. The federal regulatory framework governing registered national securities exchanges and exempt markets is designed to protect investors and prevent against fraudulent and manipulative trading practices.>
The main basis of the SEC's argument against crypto exchange platforms is that cryptocurrencies are securities as per security law. Lets have a look at what constitutes a security under the applicable law:
any note, stock, treasury stock, security future, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or, in general, any interest or instrument commonly known as a “security,” or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing. 15 U.S.C. §77b(a)(1).
This is rather interesting as I struggle to see how a majority of cryptocurrencies (yes there are some with voting rights etc) meet the definition based on this criteria but of course that's not what this is about, if we look further into the SEC's statement we see their true intentions:
Lastly, many of these platforms give the impression that they perform exchange-like functions by offering order books with updated bid and ask pricing and data about executions on the system, but there is no reason to believe that such information has the same integrity as that provided by national securities exchanges.
"same integrity" that's quite the bit of self-praise for a regulator that has allowed high frequency trading firms to create their own fibre optic cable between exchanges gain an advantage over market participants. These same high frequency traders that caused billions of dollars of damage to the stock market via flash crashes.
Of course not to mention, this is the same SEC that was supposed to regulate investment banks that caused the largest financial crisis of our generation.
Honestly, I don't know what type of regulation by who and how much we need, but what I do know is that the regulation is not coming out of a genuine concern for retail investors but rather the desire to expand oversight for government departments.
What are your thoughts on regulation and how should it be implemented?
