US SEC returns to talk about crypto regulation

The US SEC is back talking about regulation of the crypto world. Specifically, it is back to talk about Ethereum, albeit indirectly. It is worth recalling that the Securities and Exchange Commission (SEC) is the US federal agency responsible for overseeing the stock exchange.

What the US SEC said about crypto regulation: the details

Returning to the topic of the true nature of $ETH, that is, whether it is a financial security or a commodity, is the most feared man in the crypto world: Gary Gensler. The head of the SEC, during an interview with NYMAG, reiterated a viewpoint that many of us were familiar with, but which nonetheless causes a stir every time it is repeated.

Ethereum would not in fact be a commodity like Bitcoin, but would indirectly be a financial security and hence under full SEC jurisdiction. Thus ready to be subjected to what for many industry enthusiasts is full-blown harassment.

This is Gary Gensler’s view, which can be easily reconstructed from his latest interview. Ethereum, though, does not seem to care about this important non-evolution.

Gary Gensler, specifically, said that everything outside of Bitcoin is a financial security. This is actually a step backward from what he admitted a few months ago, this past September.

The situation is actually relatively complex and needs a detailed explanation to understand what Gensler said and why it may or may not be important to Ethereum and the cryptocurrency world that gravitates around that environment.

Let’s start with what Gensler told New York Magazine in the course of the lengthy interview:

“Everything outside of Bitcoin is a financial stock. You can find a website, you can find a group of entrepreneurs who may also have set up companies in offshore tax havens, they may have a foundation, they may be doing legal arbitrage and […] Underneath these tokens are securities because there is a group in between and the public expects profits based on that group.”

Should this be Gary Gensler’s stance, it would effectively leave little outside the SEC’s reach. A reach that may extend to anything that is not commodity. Hence, at least according to Gary Gensler’s fantasies, on everything but Bitcoin.

Gensler’s view: is he right?

For as much as he may try to impose his will until Congress intervenes, it is not Gary Gensler who will decide what is actually commodity and what is not. Indeed, part of Congress is on the battlefield, and this may limit Gensler’s reach, not least because there is another aspect that should be of interest to the American public.

There are so many US companies at stake, some of them publicly traded. Such a choice, if it were then to be supported politically, would turn into an attack on several major US companies.

Let’s start with Coinbase, which is a NASDAQ-listed company that is also well-connected politically. Next, we move on to the many other companies in the sector that, although unlisted, have their own relevance in the US economic sector.

These will probably give Gensler a hard time, and it is unlikely that many fund managers with more than one foot on Wall Street will agree to bow their heads without a fight. Nevertheless, one wonders whether Gary Gensler is right or wrong.

It is certainly very difficult to apply the Howey Test to what exists in the crypto world. In any case, on Twitter and other social media one can see many celebrating personalities, particularly among big-time Bitcoiners.

This is what Cardano‘s leader also lamented some time ago, according to which many, indeed too many, bitcoiners with prominent friendships were lobbying to that very effect.

However, whether or not this is the best way forward is a personal consideration, and one that must be made while also taking into account the internal industry war (an industry that for many does not exist) on other fronts, starting with stablecoins.

The previous capitulation of the US SEC regarding crypto regulation

Cornered, Gary Gensler had to accept surrender in September. An almost unconditional surrender to the powers that the US Senate, in the bill that had been circulating for a while, would like to give to the CFTC, at least with regard to Bitcoin and Ethereum.

Those who might not understand, which is more than normal, the implications of such a choice will find here an analysis made to understand just how the scenario of crypto regulations changes in the US, which remains and will remain the global hub of finance as well as of investments in crypto and Bitcoin.

In any case, Gary Gensler seemed to have given up: Bitcoin and Ethereum are not financial assets. This is a first possible key to interpreting Gary Gensler’s surrender to the unified networks, a surrender that favors the agency, which has been clashing with the SEC itself for some time now in an internecine, underground war.

However, to understand the extent of that surrender vis-à-vis Bitcoin and Ethereum it will be good to look back at what has happened in recent months.

A bill from which the SEC emerged as a major loser, because except in cases where it is clear that a cryptocurrency is in the territory of financial securities, the SEC should have passed the buck and favored CFTC oversight.

This is the body that deals with commodity derivative securities and also, consequently, commodities. It is a legal territory in which there are fewer restrictions, fewer possibilities for intervention, and where, above all, the laws allow a much greater degree of freedom.

Gary Gensler had tried, as soon as the bill was circulated, to oppose it. And he had done so by unleashing the important arsenal of compliant media.

For Bitcoin and Ethereum this meant that they would be out of the SEC’s control, just as it meant that they would not have to be subject to regulations born in the 1930s and would be incapable of governing, except by fines and bans, such dynamic ecosystems.

Thus the game moves forward, as it makes sense, with the surrender of the SEC to the CFTC, which should treat both of these assets as virtually pure commodities.