Looking Beyond the Cryptocurrency SEC Meeting – Regulation, Rumors, and Projections

February 11, 2018

Tomorrow, 10 a.m. EST, the SEC will hold a formal meeting: Virtual Currencies: The Oversight Role of The SEC and CFTC. “Chairman Jay Clayton will testify before the U.S. Senate Committee on Banking, Housing and Urban Affairs. The hearing is titled, ‘Virtual Currencies: The Oversight Role of the U.S. Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission.’”
Any information in regards to this meeting is purely speculative; however, it is important to look at indicators and previous examples around the globe when discussing the complexities inherently embedded in the “crypto market” and pre-existing markets and regulators. Cryptocurrency can be simply defined as an initiative pushing forward a form of decentralized digital currency. Cryptocurrency was born through the backbone of Blockchain technology, a new form of technology with validity and potential. Such a simplistic definition does not give justice to the complexity of the topic; but, for the purposes of this article, a broader lens would detract from the intent of this article.
Many have entered the space due to interest in cryptocurrency as an investment vehicle first and the promotion of technological growth and innovation second. Born out of this market, a wild fluctuation in gains and losses are presented in many cryptocurrencies, most familiar being Bitcoin or Ethereum. The wild swings and individuals solely or mainly driven to the market by profit potential have been treating it as such, willing to play the swings and create opportunities for wealth, opposed to long-term holders who believe in the technology behind cryptocurrency. Yes, both can exist; however, the individuals motivated to enter the cryptocurrency market are largely influenced and driven by profit factors. Because of this influx of profit driven individuals, groups have grown predatory in practice, taking advantage of the uneducated and educated alike by propping up new cryptocurrencies and projects with the sole intent of exiting with individuals’ money.
In an unregulated market, groups of individuals have taken advantage of others through unsavory mechanisms. However, even in a market without regulation, other legal implications have risen. Fraud is often a very legitimate legal mechanism that has ensnared individuals with ill intentions in this market. The amount of money obtained by some scammers, in addition to the overall attention given to the exploding market, has finally caught the eye of governments and large institutions. Governments outside the United States have tried and successfully implemented various levels of “regulation;” but, often these news headlines are overstated, and (possibly intentionally?) misleading. Because the intent behind cryptocurrency was to cut out the government and create a decentralized network of payments system(s), many who have long supported cryptocurrency since the early years of adoption are weary of government intervention. However, in a market full of scams and thievery, tomorrow’s SEC meeting will surely appease the majority of individuals who have long believed in cryptocurrency, in addition to attracting a new wave of investors and adopters necessary if the market is to continue into a period of growth like that of the internet in the dot com era.
I fully expect the SEC meeting tomorrow to regulate projects that are predatory by coming down with an iron fist on anything that is not above board. I believe the SEC will continue to act as they have by continuing to bolster innovation by taking out projects that are detrimental to individuals and the community. In effect, tomorrow, a boost of confidence from the SEC will likely flood new investors and individuals interested in adopting the technology.
The SEC will be releasing statements tomorrow in line with other countries to enhance transparency, minimize and deter fraudulent schemes, and prosecute when necessary. If one came to this article for legal analysis, the best advice I can give is to actually read and sift through the stories beyond the headlines. I have watched the markets move and react to headlines and stories that do not make sense. I have seen individuals ask,

“What can I do so I do not fall victim to predatory schemes?”

My advice is, there are no shortcuts in this game and the government shows no indication of trying to stop this technological innovation. They may want a piece of the pie but watch the news and do your own homework. Do not invest in anything that you do not understand. Finally, understand that while fraudulent schemes are illegal under the law, in an unregulated market, risk is inherent. If you believe this technology is valid, then no matter what the SEC says tomorrow, blockchain will continue to grow. If you want legal advice and levels of protection as a consumer or investor, understand the government will have to get involved to some extent. In all likelihood, tomorrow’s news from the SEC will be no news. Tune it at 10 a.m. tomorrow and listen for yourself.