The SEC doesn’t think cryptocurrencies are ‘all bad.’
Let’s face it. Of all the financial regulators in the world, cryptocurrencies have the worst reputation with the U.S Securities and Exchange Commission [SEC]. From questions about the definition of a ‘security,’ to the ICO crackdown of 2017-2018, to the slew of Bitcoin ETF proposals, the SEC and the digital assets industry just don’t get along.
Now, it would seem that the tide is turning, slowly but steadily. Jay Clayton, Chairman of the SEC, at a conference titled ‘Blockchain Infrastructures,’ as part of Fintech Week 2019 in Washington D.C, claimed that cryptocurrency violations are decreasing.
Specifically referring to “blatant violations” despite defining what it encompasses, the Chairman stated that the cryptocurrency community has been educating itself on the application of securities law to virtual currencies.
Prior to this realization, the gap was telling, especially during the ICO boom when the SEC saw a “ton” of dubious cryptocurrency investment. Clayton added that companies would put out a lot of literature about their project, put forth a ludicrous valuation and start the funding process, while not backing up their information. He stated that investors simply didn’t follow the guidelines.
“I don’t think there’s anybody who has looked at the securities laws, looked at our website”
ICOs, despite being fraught with risk, are not out of bounds as far as the SEC is concerned. In fact, Clayton said that the SEC ‘supports’ the use of coin offerings and other fundraising tools within the cryptocurrency ecosystem, so long as they are registered with the regulatory authorities and an ‘exemption’ is secured.
Protection and reach have to be balanced, especially with a product that requires a tremendous amount of retail impetus. He added,
“You can’t have wide distribution to the retail public with trading and not have the protections of the Securities Act,”
The cryptocurrency industry’s prime period of maturity and mainstream recognition came about in the same period as when Clayton took charge of the financial regulator. Appointed by Donald Trump in January 2017, at a time when Bitcoin was soaring at about $15,000, Clayton’s regulatory focus has been on digital assets. Hence, the fact that his concerns about the industry are falling, reveal a lot.
Bitcoin, in organic and contractual form, has been restricted from the larger market and Clayton has been quite vocal about the same. In September, he had said that Bitcoin’s price discovery doesn’t have the “same rigour” as products listed on the NYSE or NASDAQ. Trading also needs to be tightly regulated to see any approval,
“We have to get to a place where we can be confident that trading is better regulated.”
In light of the Bitcoin ETF proposals that are rushing through its doors, Clayton pointed out three concerns about the cryptocurrency market, concerns that are preventing a publicly-traded Bitcoin product – market immaturity, manipulation, and custody.
Putting all the negativity about the cryptocurrency emanating from the SEC Chairman in context, his recent comments seem like a compliment.