Grayscale Investment Mic Drop on the SEC: I'm Here for It

Grayscale Investment’s assessment of the SEC in its latest legal filing against the regulatory body rings true for the entire regulatory approach to cryptocurrency.?

The cryptocurrency industry should remain wary of regulators’ wish to restrict access to decentralized cryptocurrency while embracing CBDCs they would control.

In a suit filed on 11 October 2022, leading digital asset manager Grayscale Investments labeled the latest decision by the US Securities and Exchange Commission (SEC) to bar another Bitcoin spot ETF as “arbitrary, capricious, and discriminatory". Not only is this on-point for this particular case - which is becoming arguably farcical at this stage - but for the entire regulatory approach to crypto to date.?

After many months, and indeed years of talk, it seems that Western regulators are now honing-in on the cryptocurrency sector with some force. From the MiCA in the EU, to the Financial Stability Oversight Council (FSOC) report in the US, it's clear dominant financial powers plan to heavily regulate cryptocurrency in the not-too-distant future.?

While less solid than the above proposals, perhaps of most note is the IMF’s assertion that, in its opinion, we must go further than either and implement a global regulatory regime for cryptocurrency. Arguably, it is this statement that contains one of the most telling phrases of the three in terms of what these regulators are trying to achieve.

Accessibility is regulator's biggest beef?

Echoing comments made by Gary Gensler at the SEC, the IMF says it is concerned that crypto regulation is fragmented at a national level. This means that, currently, cryptocurrency is accessible to anyone with internet access. For them, this is a dangerous situation that should be stopped.?

This, in a nutshell, summarizes the ideological and philosophical difference between traditional finance and cryptocurrency. The former believes that banking and investment should be the preserve of a few elite institutions that entirely control it - who can bar from entering anyone they don’t want to participate in it.?

The latter, on the other hand, sees access to finance and a borderless global currency as a human right. This group of people believes that blockchain and cryptocurrency is one of the most important evolutions of the modern age – one that could open up wealth creation opportunities to anybody willing to participate. One that can finally provide a lifeline to people in countries where governments and regulators allow currencies to be rapidly devalued, leaving average citizens struggling to keep food on the table.

It should also be noted that these institutions that believe decentralized cryptocurrency to be dangerous, want to introduce central bank digital currencies, which they believe will be a positive outcome. This, perhaps, is because this would give them an unprecedented amount of control over the money citizens have at their disposal.?

Crypto is the alternative, not the adjunct?

It’s important to remember that cryptocurrency was set up as an alternative system to the existing one. Indeed, these reports and proposed regulations, which are thousands of pages long, are based on the history of cryptocurrency to date. If there is one thing that we in the industry know, it’s that cryptocurrency and blockchain evolve extremely fast. As such, the conclusions that have been drawn in them are already out of date.

It’s extremely difficult to change systems from within. Rather, you have to build alternative, better systems. That is the cryptocurrency project. While some factions within the industry are interested in regulation, there are many others more interested in seeing the founding principles of decentralization be realized. They are focussed on ensuring that crypto does not get sucked into the vortex of the existing, broken, and corrupt system and controlled by central powers that continue to allow repeated financial crises and collapse.

Every actor within the blockchain and cryptocurrency sector needs to recognize this. While we still need to evolve, we need to focus on providing better education and encouraging more critical thinking among the global population. It should be our goal to increase the savviness associated with financial management among individuals and businesses.?

Regulators are not friends of innovators. Particularly regulators in countries that rule the system those innovators are trying to change. It is no coincidence that developing countries that suffer under the financial weight of the West are embracing cryptocurrency. The powerful never want to give up their power and we as an industry should remember that when dealing with such powers.