Think Tank Criticizes SEC’s Approach to Cryptos
The senior fellow at the Libertarian research organization Competitive Enterprise Institute, John Berlau criticized the US SEC (Securities and Exchange Commission) for its approach towards regulations for cryptocurrencies.
Blockchain Tech and Cryptos Transformative Innovations
Berlau published a report named Cryptocurrency and the SEC’s Limitless Power Grab: Why Speculative Consumer Goods are Not Securities on April 11.
In that report, the fellow claimed that cryptocurrencies and their underlying Blockchain technology were transformative innovations, whose potential was being stunted due to difficult regulations.
Berlau also stated in his report that of all the financial federal regulators, the biggest threat posed to cryptos and Blockchain technology came from the SEC. In his report, the researcher argued that the crackdown by the SEC on this nascent technology was preventing entrepreneurs from experimenting with new methods as well as applications.
Berlau continued his argument that this crackdown by the SEC could very well threaten the functionality of the technology, especially if the regulator succeeded in classifying cryptocurrencies as securities. This approach, he felt, would hurt investors.
He stated that classifying cryptocurrencies as securities would take these digital assets out of the reach of the middle-class investors due to red-tape that would arise from not just SEC regulations, but also from financial regulatory laws like the 2002 Sarbanes-Oxley Act as well as the 2010 Dodd-Frank Act.
Such regulations imposed on securities had already prevented small investors from accessing stocks in startups or early stage growth companies.
Berlau’s report also criticized the Howley Test that had been used by both the Supreme Court as well as the SEC to define whether crypto transactions qualified as investment contracts. The researcher said that this test allowed the regulators the power to impose securities regulations on many cryptocurrencies thanks to this test.
This, in turn, allowed the agency to take much harsher action against cryptos as compared to other investments.
The research also referred to the new SEC regulations on cryptocurrencies that had been released last week. This document, called Framework for Investment Contract Analysis of Digital Assets, is a guideline on how market participants can assess whether a crypto is a security or not.
He stated that this new document only seemed to be an extension of the Howey Test and broadens significantly which digital assets would be termed as securities.
Other Critics
Berlau is not the only one to object to the SEC’s heavy-handedness when it comes to the cryptocurrency industry.
For example, according to a mainstream media report, a well-known senior lawyer from Washington DC, who advises cryptocurrency companies, stated that these new guidelines felt more like a declaration of war on cryptocurrencies. He spoke on condition of anonymity for fear of retaliation from the SEC.