Life in the Crypto Fast Lane
The regulatory lights are about to turn green for cryptocurrency fans and the federal government is hitting the gas.
In the midst of the first-month flurry of activity coming out of Washington D.C., officials at the Securities and Exchange Commission announced a sea change in the relationship between government and digital currencies.
The SEC launched a crypto task force “dedicated to developing a comprehensive and clear regulatory framework for crypto assets,” according to an agency release. SEC Commissioner Hester Peirce was tapped to head the group and released a statement earlier this month setting the tone for the new group.
Reminiscing about long family road trips as a child, Peirce said the road ahead for crypto “should be more enjoyable and less risky” than the regulatory path in the rearview mirror. She said the SEC in the past “incessantly slammed on the enforcement brakes” as the agency “lurched along a meandering route with a destination not discernable to anyone.”
Apparently, those days are over. Instead, cryptocurrency enthusiasts can put the hammer down and cruise down the highway to success – whatever that means.
“The Task Force wants to travel to a destination where people have great freedom to experiment and build interesting things, and which will not be a haven for fraudsters,” Peirce said in the release.
While that sounds good in principle, the devil, as they say, is in the details.
Who’s to say one person’s crypto “experiment” isn’t another’s fraud? As the foundation of the scientific method, an experiment is the basis for establishing facts through observation and analysis, which means at its heart it is a process of trial and error. So far so good. But experimental “failure” in the laboratory is one thing. The failure of a digital currency “experiment” is likely to do more than break a few test tubes.
Peirce seems to acknowledge this later in the release when she pledges the SEC will enforce crypto rules established by Congress.
“SEC rules will not let you do whatever you want, whenever you want, however you want,” she said.
That seems to be a slightly different destination than the freedom to build interesting things she referred to earlier in the release. And that contradiction is at the heart of the problem facing the SEC and the federal government when it comes to digital assets.
While the emergence of a “cryptogarchy” of wealthy digital asset players in the ever-expanding world of cryptocurrencies may attract more attention from the media and other observers, the fundamental question of what a digital currency is – a security or a commodity – has to be answered. If it’s a commodity, than the Commodities Futures Trading Commission should be in the driver’s seat for this trip down regulatory road. If crypto is a security, then the SEC needs both hands on the wheel.
That could be worked out in the current Congressional session, with several pieces of legislation in the hopper. But until then, trying to create a new road map for cryptocurrency oversight is bound to create a regulatory roundabout on the financial freeway.
