John Berlau, a senior fellow at Competitive Enterprise Institute has reportedly criticized the SEC for its approach towards cryptocurrencies. The criticism was part of his report which argued that speculative tokens should not be regulated by the SEC. The report titled “Cryptocurrency and the SEC’s Limitless Power Grab: Why Speculative Consumer Goods Are Not ‘Securities,” was released on April 11.
Amongst other things, the report condemned the “burdensome regulation” of cryptocurrency and blockchain by the SEC.
Berlau wrote:
“…among federal financial regulatory agencies, none poses a greater threat to cryptocurrency and the associated blockchain technologies than the Securities and Exchange Commission.”
Last week the SEC released a guideline it said would clarify security status of ICO tokens like the xrp security status several months after it was promised. The framework, however, fell short in the opinion of cryptocurrency commentators because it merely tried to apply an age long Howey Test to the tokens.
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SEC regulatory Negatively Affecting Cryptocurrency Investors
Berlau touched on a sensitive area; how the actions (or inactions) of the U.S. securities regulator is restricting cryptocurrency investors in the country.
He wrote:
“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.”
According to Belau, the Howey Test gave the SEC power to regulate any cryptocurrency as security adding that the commission “appears to stretch the Howey Test even further and broadens greatly what products could be considered securities.”
Also, the guideline which is not legally binding did not specifically clear notably xrp security status which has been a concern for crypto observers.
Writing further, Berlau notes that the SEC’s regulatory stance was limiting innovation in Blockchain technology since some applications of the technology required use of tokens.
TechCruch Boss: SEC over-regulating cryptocurrency
As Smartereum reported, Michael Arrington, the Founder of the technology news outlet, Tech Crunch recently criticized SEC’s regulatory approach to cryptocurrency calling it a “total disaster”. Arrington who own a Blockchain-focused investment fund explained that it was better investing in crypto companies based outside the U.S. because US crypto-investment are highly regulated by SEC.
He said his fund, Arrington XRP Capital is investing in stablecoin company Terra and SpaceMesh which are based in South Korea and Israel respectively.
Ethereum (ETH) is Not a Security, Could XRP Be Next?
Cryptocurrency enthusiasts in the United States are left asking what is the securities status of major cryptocurrencies—xrp security status, eth security status, etc. The Security and Exchange Commission which has in the past hinted that these crypto tokens which were issued through initial coin offering (ICO) may be securities and has gone ahead to charge some cryptocurrency operators for offering unregistered digital assets. This approach of the SEC to cryptocurrency has been criticized by notable figures within the cryptocurrency community and the broader fintech sector.
According to NewsBTC; the Securities and Exchange Commission’s (SEC) Chairman reaffirmed his agency’s previous stance that Ethereum (ETH) is not a security product, and as such it falls under different regulatory structure that is far more crypto-friendly. He also added that cryptocurrencies similar to Ethereum are also exempt from being classified as securities – although he didn’t name any specific cryptos.
Although this is certainly positive for Ethereum investors, it doesn’t come as a big surprise, and the cryptocurrency that investors are most interested in hearing what the SEC’s thoughts on is XRP – the cryptocurrency most commonly associated with FinTech company Ripple.
Although many investors and crypto enthusiast see regulatory agencies like the SEC as the “boogeyman” who is out to halt innovation that could pose risks to investors, Clayton explained in a recent response to a letter from Coin Center that he believes the agency has taken a balanced approach towards regulating the nascent markets. Chairman Clayton explained;
“Overall, I believe we have taken a balanced regulatory approach that fosters responsible innovation in this area, while also protecting investors and the markets,”
Although Clayton did not go as far to mention any cryptos by name in his letter, and those affiliated with the SEC have largely held their tongues when it comes to XRP, he did explain that some products that could initially be designated as securities products may ultimately grow out of that definition. He explained;
“A digital asset may be offered and sold initially as a security because it meets the definition of an investment contract, but that designation may change over time if the digital asset later is offered and sold in such a way that it will no longer meet that definition,”
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