Will the SEC Smother Cryptocurrencies in the Cradle?

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The SEC recently issued a nearly 700-page plan proposing to redefine Alternative Trading Systems (ATS). SEC Commissioner Hester Peirce called the plan “a Trojan horse” aimed at driving out cryptocurrency exchanges and decentralized financial communities. At the same time, the White House is expected to issue a memorandum on the potential threat of cryptocurrencies to the stability of financial markets.

What the hell is the administration thinking? While there is no doubt that the cryptocurrency industry has been chaotic and requires regulation, the administration’s policy is shortsighted, seeking to kill a nascent industry that has the potential to transform the United States into a major trading hub. , along with employment and related services that accompany it. On the other hand, a blockchain-based intelligent crypto infrastructure could ultimately simplify our existing financial systems, making them cheaper, safer and more fair.

An overreaction that deprives the United States of its role as a market

The SEC’s Trojan Horse proposal is a direct and obvious existential threat to the cryptocurrency industry in this country. First, it completely kills the trading activity, then attacks other elements of the business. The agency’s undeserved efforts will force even more of the domestic crypto services sector out of the United States and into regions where they can operate under more sensible regulation (e.g., most of the rest of the world). They are doing the exact opposite of what they should be doing.

The SEC, if allowed to succeed, will have put the final nail in the coffin of the US cryptocurrency industry and stifle innovation in space. In addition to causing countless thousands of national job losses in local cryptocurrency exchanges, as well as all the infrastructure and support systems that maintain cryptocurrencies, they will, once again, have alienated countless retail and institutional investors. The SEC must be reminded that at least 20% of the US adult population is currently exposed to cryptocurrencies in some form.

What is the alternative view?

Rather than throwing the baby out with the bathwater, the government should, as FTX’s Sam Bankman-Fried testified, work to bring more of the cryptocurrency industry back to the ground in the US and make it easier to trade crypto assets here. . He points out that 95% of cryptocurrency trading volume currently takes place offshore and urges greater regulatory clarity to attract this business to the United States

Most crypto assets are not accessible from the United States at all. While some US financial groups like Blackrock, Mastercard, VISA and JP Morgan offer cryptocurrency-based financial products, most American cryptocurrency prospectors are forced to invest through mechanisms overseas. This deprives US financial service providers of revenue and creates a situation where the few US crypto exchanges charge usurious fees for market access. Why can’t we encourage growth by bringing that liquidity and that asset back to ground?

By creating thriving but regulated crypto financial centers in the United States, the government could reap the rewards of modest taxation on cryptocurrency earnings while encouraging spending on cryptocurrencies and fiat through blockchain-based DeFi payment systems that reduce high transaction fees and reduce the risk of fraud. These hubs could exist alongside legacy payment systems as consumers do what they do best: compare the prices and efficiency of the two systems.

The demand is increasing. As a former investment banker developing a merchant platform that enables instant and cheap cryptocurrency transactions, I have already received inquiries from large organizations looking to offer crypto payment capabilities to their clients.

Take the next steps

The Biden administration must reign in the SEC and its boss before things get worse. The SEC’s recent conduct is as devious and dishonest as it is scandalous. Without a clear indication from the White House we risk cutting our noses to spite our face. We urgently need to see the executive order proposed by President Biden which purports to bring greater regulatory clarity. If he truly cares about the financial interests of the United States, he will give much more power over the cryptocurrency industry to the CFTC and banking regulators to help grow our economy.

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