SEC’s View on Cryptocurrency Disapproved of by Libertarian Organization

In a report published on the 11^th of April and written by John Berlau who is a senior fellow with Competitive Enterprise Institute, the United States Securities and Exchange Commission (SEC) has been strongly condemned for its seemingly unfair method used in the regulation of cryptocurrencies. The report is called

“Cryptocurrency and the SEC’s Limitless Power Grab: Why Speculative Consumer Goods Are Not Securities”.

The Problem With The SEC’s Approach

Berlau expressed his support for cryptocurrency as it works effectively without middlemen. However, such a functional financial setup could be seriously affected by unfair regulation.

Berlau says:

“Bitcoin and other cryptocurrencies are peer-to-peer networks driven by consensus that make electronic cash for remote transactions without bank-like intermediaries. Unfortunately, its promise for transformative innovation could come to a screeching halt under the weight of burdensome regulation.”

The report also stated that the SEC is probably the biggest risk factor affecting crypto especially when compared with all other

“federal financial regulatory agencies.”

Berlau believes cryptocurrencies should be held in as high a regard as possible and the government’s reluctance to give the sector the required support could hinder innovation and the general growth of the industry.

Berlau also expressed his reservation about the SEC’s consideration of cryptocurrency as a “security”. He thinks that it could hamper the general practicality of blockchain. He said

“Deeming cryptocurrency as a ‘security’ could put cryptocurrency out of the reach of middle-class investors because of the same red tape – both from SEC regulations and from financial regulation laws such as the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act of 2010 – that has hindered small investors’ access to stock in early-stage growth companies.”

Use Of The Howey Test

Designed by the Supreme Court, the Howey Test is a test which is used to decide on whether or not to describe specific transactions as investment contracts. According to Berlau, using the Howey Test doesn’t favor the crypto market because a lot of cryptocurrencies would be officially termed ‘securities’ meaning that the SEC would be well within its rights to take radical approaches towards them.

He also seemed to disapprove of the SEC’s guideline publication which was published to help people determine whether or not any digital asset is an investment contract and security. According to Berlau, the publication seemed to “stretch the Howey Test even further and broadens greatly what products could be considered securities.”

Could Crypto Be Omitted From Federal Laws?

Some days ago, some members of the United States House of Representatives reinstated the Token Taxonomy Act which was originally proposed in December of 2018. If this eventually develops into law, digital assets would be officially omitted from all federal laws regarding securities.