The Securities and Exchange Commission has been on a yearslong power grab, and far too often its main target has been the
Instead of issuing
Last month, Blockchain Association joined the Crypto Freedom Alliance of Texas in
For nearly a century, the definition of “dealer” focused on dealer services to customers. The SEC has flipped that well-established paradigm on its head. Under the new definition, regardless of whether a customer exists, those who trade digital assets and, as a result, provide liquidity, and those who develop these software protocols are now in the SEC’s crosshairs. This is true despite many transactions involving the use of automated, unhackable, open-source software — unlike a traditional human intermediary. That’s an untold amount of innocent people who could now face an extreme and unnecessary regulatory burden or an SEC enforcement action simply because of their adjacent association with software.
In the absence of any legal action reversing the rule’s finalization and implementation, law-abiding digital asset market participants would be left scrambling. Not only will the regulatory burden of having to register as a dealer lead to a consolidation of market participants and increased market instability, but the unanswered threshold question of which digital assets constitute securities leaves participants unsure of whether the rule applies to them in the first place.
Ultimately, this rule will disincentivize people from providing liquidity in digital asset trading markets, which would lead to an unnecessarily undercapitalized and risky market. Discouraging market participation, especially from well-capitalized institutional investors, has been shown to increase volatility and concentrate market-moving ability among a small group of digital asset holders.
What could be more un-American than making a thriving U.S. industry less safe, more cumbersome and riskier for consumers while reversing decades of progress democratizing financial access for all?
Last week, the U.S. House of Representatives voted in an overwhelmingly bipartisan fashion to pass the Financial Innovation and Technology for the 21st Century Act — a symbolic vote that shows Congress, not the SEC, should make policy. But until new fit-for-purpose crypto regulatory legislation is passed and signed into law, the courts remain our only recourse.
For the U.S. to remain the true global leader in technology and innovation, the SEC must go back to doing what it was designed to do: providing clear and concise guidance and oversight that allows companies to grow and thrive. The industry cannot continue to operate in a constant state of uncertainty and fear of regulation by enforcement of rules which either haven’t been properly communicated or were enacted without fair and meaningful engagement with those most impacted.
Failing to do so leaves us, as an industry and as a nation, at a heightened risk of