The SEC Commissioners meeting with the House of Financial Services Committee in the US is underway and provides some insight on the crypto regulations in the space.
The Committee headed by Chairwomen Maxine Waters divulged on the issues related to retail investor protection from crypto-investments, share buy-backs, capital infusion and the shift from public to private investing space.
The panel consisted of the five commissioners of SEC: Jay Clayton, Rebert J. Jackson. Jr., Hester M. Pierce aka ‘crypto mom,’ Elad L. Roisman, and Allison Herren Lee. The concerns of the housing committee were focused on investor protection but also seeks the inclusion of investment opportunities for retail investors.
Remember the Libra Senate hearing with its’ head David Marcus? The senators don’t seem to have changed their minds. Chairwoman Waters cited that the US, France, Germany and many other countries have raised opposition to it.
Senator Brad Sherman was particularly dismissive of the project. He said,
It is clear that Libra will be a mutual fund. Mark Zuckerberg has a lot of money, but he does not have the power to print more.
Furthermore, the Senator was also not in favor of the ideas of cryptocurrencies and digital assets in general as they provide avenues for tax evasion, terrorist funding, and Ponzi schemes.
On Crypto Regulation and Token Taxonomy
One of the most pressing questions of the Committee were around token taxonomy. While the panel avoided speaking specifically about assets. Chairman Jay Clayton told the senate in an important note,
Crypto Assets while they have benefits, including eliminating friction alike.. can present a great deal of risk…
Particularly in cases where in-form they are the same as securities or same as currencies or same as payment systems, but they are not regulated in the same way… We have a developed an ecosystem of financial regulations over the years: securities, commodities, currencies…
The extent a crypto-asset will be used to evade those regulations. I have a problem with it.
Interesting Paradox in-front of Regulators
Due to the ambiguity in projects like Libra and crypto assets, the SEC suggested that they have to view the performance of these assets before making any comments.
However, it raises a paradoxical situation, as the current guidelines of the SEC are not enforcing and do not clearly define a ‘black and white’ test.
Senator Anthony Gonzales pointed to this dilemma faced by investors. He said,
What I heard is ‘we’re not going to know if it’s a security till we see it operate,’ and what I’m hearing from companies is ‘we’re not going to operate until we know whether we’ll be dinged for a security or not.’
The Senate expects the agency to expedite the process of defining crypto-laws more clearly.
Nevertheless, Clayton also mentioned that the SEC doors are open to innovators and entrepreneurs alike. They just require to register a particular asset and then they are good to go.
How do you think this meeting will shape crypto-laws? Please share your views with us.