If the first half of 2021 was marked by the all-time highs in the prices of Bitcoin (BTC) and Ethereum (ETH) and also by the market crash that followed the new records, The second half of the year should be remembered for the showdown between US government regulators and the crypto community.
The growth of the industry, with its inherent premise of eliminating intermediaries, made it inevitable that regulators would turn their attention to the sector. The first alarm was caused by the vagueness and breadth of the terminology used to define what would be the “brokers” in the text of the bipartisan infrastructure bill approved in July by the US Senate.
Recently, was the confrontation between the US Securities and Exchange Commission (SEC) and Coinbase over an investment product based on crypto-asset loans. The SEC threatened to sue Coinbase if the major US exchange went ahead with the product launch, claiming it was a securities offering. Business leaders and members of the crypto community have criticized the SEC’s lack of dialogue and viewed the move as an attack on the industry.
According Brian Brooks, who in his day was Acting Comptroller of the Currency and former CEO of Binance US, and therefore has been on both sides of the table discussing regulatory issues, the problem is that the SEC relies on traditional market concepts and rules to address a nascent industry whose peculiarities require a new legislative approach.
In a panel on institutional adoption of digital assets at SALT, a biannual conference that brings together personalities from global finance and the tech industry, Brian Brooks presented his perspective on potential regulatory guidelines:
“I don’t start from the regulations. I start with: ‘What is the activity we are dealing with here and what aspects of it should we regulate?’ And I am not assuming that everything that is happening in the cryptocurrency industry should be subject to banking or securities regulation. “
Brooks argued that regulation deals with issues raised by individuals, but cryptocurrencies and Blockchain technology deal with programming code.
While this is only partly true, as there are people who develop the codes of the protocols, but he was only taking advantage of the fundamental premise of blockchain technology, which is decentralization and the potential it has to eliminate “bad practices, fraud and self-limitation of the equation “, as he stated in his participation in the conference.
In that case, what remains to be regulated? Rules to compensate for any losses related to malicious attacks and cybersecurity rules, according to Brooks.
Brett Tejpaul, director of sales, trading and custody at Coinbase, said that it has always been the decision of certain companies to take risks in the legal vacuum. And he added:
“For all these years, by and large, regulation has followed innovation. So there was not a time when it was absolutely clear what the regulatory backdrop was that would allow capital to come in.”
Brooks, who was the acting head of the Comptroller of the Currency in the Trump administration, put some of the blame for the regulatory excesses on Democrats. He cited SEC Chairman Gary Gensler’s testimony before the Senate Banking Committee on Tuesday to say that Democrats “believe that all securities-related activity should be subject to securities regulation.”
There are divergent opinions and the future is open, but the unanimous opinion of the members of the cryptocurrency community is that they are right. But that alone doesn’t guarantee they win, as Glenn Barber, director of sales and business development at cryptocurrency custodian Copper, summed up in another panel at the conference:
“We have the opportunity to do something that will affect the future while maintaining what could be a very important competitive advantage in terms of funding and the way we handle this technology, or we could lose it.”