Commentary
On June 6, the Securities and Exchange Commission (SEC) fired a bombshell at the cryptocurrency industry. It’s suing Coinbase, a publicly traded company that the SEC approved after going through its business plan to publicly list for trading two years ago. It’s also suing Binance, a cryptocurrency exchange that’s domiciled in Hong Kong but has a U.S. subsidiary.
The Twitter account Unusual Whales reported that before the SEC pounced, someone had purchased out-of-the-money puts on Coinbase for $100,000 that turned into millions of dollars when the SEC announced its action. Let’s hope it wasn’t a congressperson or other government insider.
You might think to yourself, “Ah crypto, it’s a scam, so who cares?”
I’m not going to try and persuade you on the validity of crypto, but I do think that, in America, we need the
freedom to innovate. Innovation creates competition, which creates a better lifestyle for all Americans.
There have been frauds in crypto, but blaming the frauds on the innovation of crypto is the same as saying that it’s the gun’s fault when a shooting occurs. Certainly, there are issues in the crypto industry that need to be addressed, but the SEC has abdicated its duty in addressing them and is instead playing hardball politics with a different end game in mind.
People that are “right of center” politically get very upset when President Joe Biden uses the Department of Justice or IRS to attack political enemies. They should. They also should be just as upset about the SEC attacking political enemies, albeit in a different form.
“Will the State objectively regulate cryptocurrencies when cryptocurrency has the ability to topple one of the State’s greatest powers, money creation?” McGinnis asked.
I think that after the SEC’s action, we can conclude that the answer is undeniably “no.”
Buried in the flurry of news on the lawsuits was that Republican lawmakers on both the House Agricultural Committee and House Financial Services Committee released a cryptocurrency regulation bill that they had been crafting for months. They solicited and received input from the banking and financial services industry along with the cryptocurrency industry’s input.
Here’s what’s interesting about the proposal. For years, the cryptocurrency industry has asked the SEC to be clear about its intentions regarding regulation. The agency has been opaque, and under current SEC Chair Gary Gensler, it has been ferocious in its attempts to destabilize the industry in the name of protecting people from fraud.
However, destruction of the industry is looking more and more like the true goal of the SEC, along with the U.S. Treasury Department. They want to wreck the competition that the cryptocurrency industry brings to the table and issue a digital dollar. This is the same playbook that the Chinese used. A digital dollar would be horrible for anyone that values freedom and liberty. There are even those who have opined that the reason that Silicon Valley Bank, Signature Bank, and First Republic Bank were folded up was that they provided a lot of the on and off ramps between fiat government-backed currency and cryptocurrency. Many crypto companies were banking there.
This isn’t dissimilar to the way that the National Federation of Teachers Union and the Department of Education treat the school choice movement.
The Republican bill took some of the regulatory teeth and turf away from the SEC. One example is that the bill would clarify the difference between a commodity and security. Commodities fall under the purview of the Commodity Futures Trading Commission (CFTC) and the House and Senate Agriculture committees, while securities fall under the purview of the SEC, the House Financial Services Committee, and the Senate Banking Committee.
Democrats didn’t participate in the writing of the bill, and it looks like they were told by the Biden administration not to participate because the administration was working behind the scenes using the SEC and U.S. Treasury.
The bill would create a “decentralization” test to help decide whether a particular token is a commodity, but that wouldn’t exclude it from necessarily becoming a security, depending on how it’s used. If it has no central form of governance and no intermediaries, it’s a commodity.
For example, bitcoin has no central authority or central form of governance. Under the Republican bill, it would be a commodity, and the CFTC would regulate it. Stablecoins such as USDC or Tether do have a form of central authority and would fall under SEC regulation.
That definition grabs and clarifies regulation and takes power from the SEC and the executive branch of government, returning it to the marketplace. If there’s one thing we know about a government agency, it’s that they'll do anything to retain any shred of power and budget.
We need to call the June 6 action by the SEC exactly what it is. It’s a brazen political attempt endorsed and actively enabled by the Biden administration to destroy an industry and grab more turf for itself. It’s a political attempt to try and take any credit away from Republicans who worked steadfastly on a set of laws that the industry has desired for many years. If the Republican bill became law, the sunlight would shine on them—and that’s something the Biden administration won’t tolerate.
Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
