The recent Congressional hearing into crypto regulations, featuring Gary Gensler, really opened up a can of worms. Having followed most things crypto closely over the years, it's pretty hard not to shake one's head at what appears to be a dislocation from digital asset realities seemingly emanating from the SEC.
Gensler completely avoiding digital assets in his written testimony.
You've got to be kidding me. Crypto's among the most hot-button topics in 2024, and the SEC chair doesn't utter a word. That's like going to a Super Bowl party and not talking about football.
My view is that Gensler got roasted at that hearing, the "regulation by enforcement" approach adopted by the SEC is not only ineffective but also damaging to the industry. It's like trying to get out of a maze blindfolded, you may reach the end but will bump into a lot of walls.
I've personally watched how the gray area is affecting these small crypto projects and individual investors. My friends, who happen to work on some of the most innovative solutions on the blockchain, are always looking over their shoulder, wondering whether they are breaking some sort of rule nobody articulated.
That's no way to encourage innovation.
Now, the FIT 21 Act from the House could at least be described as a decent first step. Of course, it sets rules, but the controversies come with the definition of decentralization as a 20% ownership threshold. That is going to raise some eyebrows within the crypto community, I can tell you that.
As Commissioner Hester Peirce hit the nail on the head, "Very bad," was the approach of the SEC. I can only agree, How can we ever expect to have a viable crypto ecosystem, with goalposts moving all the time?
And spare me the statement from Gensler that existing laws are "sufficient and explicit." If that were the case, why are we having this hearing? Why are industry participants and lawmakers alike calling out for greater clarity?
Well, the only thing I do agree with is the fact that celebrity promotions and "pump and dump" schemes have been a concerning factor.
Seriously, too many have gotten burned because of some so-called crypto influencer. But once again, without guidelines, how are we going to police this thing?
The response from Gensler, placing the emphasis on tips and complaints, does not sound like a confidence-inspiring strategy. It literally sounds like whack-a-mole, rather than trying to address deeper causes.
But it's the disconnect that bothers me, what the focus of the SEC is, versus what the actual needs are in the crypto world. This speaks to cybersecurity incidents, conflicts of interest in securitization markets, basically "yawn", whereas out there in crypto-land, it's innovation, change, at lightning speed, every single day.
My own take would be that the SEC finally needs to wake up and smell the crypto coffee, put some regulatory framework favorable for innovation and investor protection in place, if you will.
Is that a big ask?
Until we get that, we are stuck in this limbo of regulation and may make the US fall behind in this global crypto race.
Crypto is here to stay.
It's about time the SEC stopped dragging its feet and finally gave us the clarity we so desperately need. If not, we'll continue to strangle one of the most exciting technological revolutions of our time.