Crypto.news’ editor Nicholas Ross Say shares his opinion on the US SEC’s recent crusade against crypto that cost the industry millions of dollars. He opines that innovation oppression won’t last forever.
Disclosure: The views and opinions expressed here belong solely to the author and do not represent the views and opinions of crypto.news’ editorial.
The most valuable asset in the world is innovation.
New ideas that create positive results are worth more than anything else to an economy. Today, the United States Securities and Exchange Commission (SEC) is using an existing body of law to eliminate financial innovation in the U.S. and attempt to support a dying financial paradigm that is well past its time.
There are two major issues for the U.S. in this current situation. Firstly, anyone with an idea for decentralized fintech is being pushed out of the U.S. economy and financial system. Secondly, the U.S. bureaucrats backing the SEC’s war on decentralized finance are totally disconnected from reality.
The SEC went barking mad
We simply can’t know the long-term consequences of a war on innovation. It is simple to see that it will chase top-level devs out of an economy and discourage anyone who sees adaptation as a means of dealing with the challenges we face as a global society.
In short – stifling innovation is a lose-lose proposition, and that is the direction the U.S. is going when it comes to decentralized finance.
What is much easier to show is that the SEC took existing regulation and law, weaponized it, and turned it on any company it could. An example of this is the SEC v. Ripple case, as the idea that XRP is a security, or investment contract, is totally absurd.
The SEC went after Ripple rather early, and over the past week, many other projects and platforms have felt the wrath of the SEC.
Casino chips aren’t a security
The SEC is running wild with something called the Howey Test, which is one of the most important ways something is deemed to be a security in the U.S. financial markets. Long story short, Mr. Howey had a complex investment scheme involving selling land, leasing it back, growing oranges, and much more.
Ripple did none of this. In fact, if one were to compare XRP to something that exists in the legacy economy, it would be like a casino chip, although one with no value. To be sure, the comparison is imperfect. Casino chips are far more like stablecoins, as they tend to be linked to a fiat currency value.
XRP, on the other hand, is a fungible register on a complex ledger (not even a blockchain in the bitcoin sense). It is a token, but it was never assigned a cash value, nor did Ripple Labs pitch it as a way to create returns for people that bought it.
In the sense of the Howey test, there is no land, there are no leases, no oranges are being grown, and you would have a better chance of making a return at a roulette table. Ripple may as well have been selling raffle tickets for a raffle with no prize when it sold XRP to the public.
The SEC has gone well beyond the pale on this one, and there is a good reason why.
Why is the pressure on cryptos now
The Western financial system is on its last legs. The clock has been ticking since Alan Greenspan took over the Federal Reserve in the mid-1980s. It could be argued that the fundamental changes started under Fed head Burns and U.S. president Nixon, but with the USSR still very much alive, the USD was in no danger whatsoever.
Dead money is worthless because it can’t buy something of value. While the major Western currencies like the USD, EUR, JPY, and GBP aren’t worthless yet, the policies set in motion by Greenspan will make all the major currencies that exist today lose most, if not all, their value in the coming years.
Cryptos, on the other hand, give people a way out of the system. Despite the wild ride that cryptos have been on for the last decade, they are still attracting attention, including the attention of the global bureaucrats that have everything to lose if modern fiat currency becomes worthless.
The SEC is doing its part to keep the Western financial system alive, but how long its shenanigans will help to hold a corrupt system together is questionable.
When the system goes bust, any economy that has allowed decentralized currencies to grow will be rewarded, and its citizens may be able to side-step the single greatest financial calamity in human history. If that economy also allowed decentralized financial system development – it would be all the better for it.