Now Securities and Exchange Commission Chairman Gary Gensler is ready to deliver the coup de grace. He has said that he considers most tokens to be securities, which means that issuers and intermediaries, unless they register with the SEC and meet all its requirements, which most can't or won't do, are involved. in illegal activities. The agency sued a trading platform (Bittrex) and signaled its intention to do the same with Coinbase, the largest in the US. The aggressive enforcement could all but close the door on cryptocurrencies, removing the main conduits through which Americans move dollars in and dollars out.
Have a good trip? Not quite.
Markets have a way of turning irrational exuberance into social benefit. Investors in the broadband boom of the early 2000s, for example, suffered heavy losses but also left valuable fiber-optic infrastructure for future generations. Crypto, for its part, may yet lead to better forms of money, more convenient cross-border payments, more efficient finance, new ways of running mutual businesses. With the proper identification requirements, blockchain networks could even be much more transparent and less conducive to crime than the existing banking system. (Authorities are already using them, for example, to track North Korean illicit profits.)
As distant as that brighter future seems, regulators should at least allow it, as the European Union has tried to do with new rules on crypto markets. To that end, the US should create a legal space for the issuance and trading of instruments, such as Bitcoin and Ether, that do not fall into categories such as securities or derivatives. Requirements for (among other things) the disclosure, safety, soundness, governance, and protection of customer assets could come from Congress, or from an industry-funded overseer along the lines of the Internet Regulatory Authority. Financial Industry.
Such a framework would give the SEC and the Commodity Futures Trading Commission broad powers to quickly rid the market of thousands of bad actors, without getting bogged down in definitional details, and without diminishing their authority in their traditional jurisdictions. Speculators would still make bets that would go wrong, as they do in any market. But the overall reduction in scamming would give the true innovators the best possible chance of achieving something significant. True Crypto believers could hardly ask for more.
More from Bloomberg's opinion:
โข Crypto Bros hailing EU rules are in shock: Lionel Laurent
โข The SEC is coming for Bittrex: the matter of Matt Levine's money
โข These global money transfer ideas deserve a try: Andy Mukherjee
The editors are members of the editorial board of Bloomberg Opinion.
More stories like this are available at bloomberg.com/opinion
