Muddle
“Muddle” – a cartoon illustrating how the SEC is tying itself in knots trying to pursue the blockchain industry.
Last week saw Gary Gensler, the head of the SEC, defend the agency’s approach of arbitrary enforcement to a Congressional committee.
One pointed question from Representative Ritchie Torres asked to confirm whether buying a Pokemon card is considered undertaking a securities transaction, when Gary confirmed it was not.
Then the congressman asked if buying the same card as a tokenized asset on a decentralized exchange would be considered a securities transaction, upon which Gary equivocate.
From an agency that is meant to be technology neutral, this exchange was telling and demonstrated a surprising level of sophistication of the industry, which is perhaps testament to industry pressure groups like Coinbase’s Stand With Crypto.
With Congress’ Financial Services Committee passing two major bills in July that would help provide clarity over which existing financial rules apply to the industry, there is a sense of hope that Congress can pass laws that instruct the SEC how to manage the industry.
The challenge is that for every Ritchie Torres, there are many other representatives who consider Sam Bankman-Fried’s fraud emblematic of the industry and have competing issues such as the government shutdown, the Farm Bill and National Defense Authorization Act (NDAA), all making it a struggle for the industry to be heard.
The danger is that with Presidential and Congressional elections next year, all the air in the room will be sucked into partisan activity and the default will be a reversion to the existing muddle perpetuated by the SEC’s enforcement through regulation approach.
