Extensive and Unenforceable SEC Regulations Should Be Challenged
For those who don’t know or aren’t located in the USA: the U.S. Securities and Exchange Commission (or ‘SEC’) is an independent federal agency which was founded in 1934, by then-President Franklin D. Roosevelt.
Conceptually, it is an impartial entity for the enforcement and implementation of federal legislature and regulations pertaining to securities and tradable assets; as well as national stock and options exchanges.
The SEC have recently been in the crypto-financial headlines because of their decision to define cryptocurrencies as securities. As a result of this, all relevant laws that pertain to securities are now applicable to cryptocurrencies as well, and this is a statement that the SEC have been all too keen to broadcast.
As such, the company have opened investigations and delivered subpoenas to 80 cryptocurrency companies.
These actions have far reaching implications for the crypto industry both in the USA and abroad, as the decisions made by American lawmakers often have a rippling effect on other Western nations.
The Speculative Feedback Loop
For investors and active traders, the decisions made by the SEC have had a negative impact on the overall value trends across the crypto-markets.
Predictably, the trend has propagated by opportunistic publications (whose revenues are driven by sponsorships and advertising) – which creates a feedback loop of negative speculation / reaction, and the spread of FUD.
It appears that the highly publicized legal actions taken by the SEC as mentioned above are (in this writer’s opinion, at least) meant to make examples of the parties involved, whilst sending a message to companies within the industry that they are not willing to compromise on enforcing their legislative decisions.
Whether the government can universally enforce these rules across an industry which is largely built upon the ideological and technical principles of decentralization, however, is highly questionable.
A Law for the Abiding
I believe that there are a few potential outcomes of such mis-informed law-making, which are likely to take place because of the SEC’s mis-informed decision-making.
- They will create the laws / rules first and create an enforcement strategy second – indicating a fatal lack of insight into the very-real complexities of the ever changing crypto-sphere.
- Due to their lack of technological expertise, they will likely contract an external organization or form a new government department to complete investigations & enforcement at the taxpayers’ expense.
- Because of the difficulty of enforcing these rules (which they are seemingly unaware of) the lawmakers may opt for extreme penalties as a deterrent to those who risk disobeying.
Whether the government can enforce their regulations effectively on cryptos or not; what is likely is that the rules won’t be governed absolutely (it’s almost impossible to achieve 100% enforcement of crime).
As a result, legitimate businesses are likely to suffer because of this ignorance whilst the real bad actors are unaffected and apathetic to the new implementations.
Bear in the China Shop
The situation in China, for example, is indicative of another potential unforeseen result of increasing regulations. The country recently and infamously imposed a comprehensive ban, blocking all cryptocurrency trading and ICO websites from inside the country and abroad.
Serious entrepreneurs and business-owners with a thorough dedication towards their craft have subsequently migrated to independent coastal municipalities, such as the special administrative region of Hong Kong, to overcome these obstacles. Presumably if the ban were to somehow be introduced into such cities also, then the cryptocurrency organizations in China (or at least, the legitimate ones) would go one step further and move to another country with less restrictive laws on cryptos.
This would be a slap in the face to the government themselves in the long-term, as they would be missing out on the financial incentives offered by effective, fair taxation & regulation of the sector; rather than outright blacklisting.
Similarly, other federal departments in the USA have made their own mistakes regarding cryptocurrency. Citizens and organizations are required to pay tax on all cryptocurrency earnings and transactions, as they would with any other currency. The government have again subjected a misunderstood market to the regulations expected of a highly controlled, centralized form of tender (fiat) – and there have not been any reported instances of conviction in this regard due to the difficulty of identifying of decentralized data as an unauthorized third party.
I have nothing against regulation, considering the potential of cryptocurrency to be a volatile ‘wild west’ of finance; but it needs to be approached in a completely different way.
Manipulators of Ignorance
A quick diagnosis of the problem leads to the conclusion that the key malefactors contributing to these controversial laws being implemented are political influencers who possess a disproportionate level of technical knowledge in comparison to their peers.
Look at FCC Chairman Ajit Pai, for example. Despite your opinion on the net neutrality bill, its repeal was heavily influenced by the man’s disproportionate industrial expertise on the subject; which was accumulated through a career of working for the very organizations who stand to benefit most from the decision.
Furthermore, the controversial repeal was influenced heavily by corporate lobbying groups. It should be considered that finance-based legislature is similarly likely to be influenced by powerful influencers whose vested interests lie in centralized industry.
Featured image courtesy of Shutterstock.