The United States Securities and Exchange Commission (SEC) is essentially the “law of the land” when it comes to investing. While largely concerned with domestic affairs, the sheer size of the American economy dictates that their decisions will often have a global impact. One recent example of this observation can be seen in how the SEC has begun to view cryptocurrencies.
Why has their perspective changed in recent times? How might this impact the future of crypto trading? Might this stance lead to a greater level of transparency, or could big brother soon be rearing his head throughout the cryptocurrency ecosystem? These are some of the questions that we will be tackling throughout the remainder of this article.
What has the SEC Said in the Past?
The Securities and Exchange Commission has been known for taking a less than amenable stance when it came to cryptocurrency trading in the past. This approach was more associated with “aggressive enforcement; particularly when under the guidance of former Chairman Gary Gensler. Simply stated, United States investors were less than optimistic in terms of the future of domestic cryptocurrency trading opportunities. The good news is that the SEC has now begun to change its tone. Why is this the case?
New Leadership with a More Accommodating Perspective
The Securities and Exchange Commission now realises that cryptocurrencies represent one of the fastest-growing marketplaces in existence. When we then take into account a truly global economy, the conclusion becomes clear. If the United States continues to curtail crypto investment opportunities, traders will simply look elsewhere. This is (arguably) one of the main reasons why current SEC chairman Paul Atkins has embraced a more conciliatory tone, and it makes perfect sense.
Any investor knows that the best index trading strategies are known for their superior levels of transparency. Why should cryptocurrencies be any different? This is the reason why the SEC is now developing what it refers to as a “sensible regulatory path”. As opposed to thwarting the efforts of cryptocurrency firms, it is instead more concerned about curating a clear framework that companies will have to abide by.
If we were to lay all the cards on the proverbial table, this effort is not the result of altruism alone. The simple fact of the matter is that the sheer size of the cryptocurrency ecosystem could provide a welcome source of revenue for the United States. These concerns have become particularly relevant when taking into account the actions of the Trump administration, and the questionable outcomes that they may have on the fiscal health of the nation. So, what approaches could soon be taken by the Securities and Exchange Commission?
A Dedicated Cryptocurrency Task Force
This first step is intended to provide more transparency to cryptocurrency trading throughout the United States. The so-called task force will focus on several key initiatives, such as:
- Providing a clear definition of which cryptocurrencies are classified as securities (and subject to SEC regulations)
- Developing a specific set of guidelines for cryptocurrency startup projects
- Establishing a framework for cryptocurrency ETF trading
What is perhaps even more interesting is that this task force is open to taking feedback from the public. Investors can have their say in terms of which policies are the most popular, as well as those that may require further refinement. However, we have yet to see exactly how these proposals will eventually manifest themselves in real-world scenarios.
Addressing Potential Misconduct
The SEC previously operated a division known as the Crypto Assets and Cyber Unit. This has now been renamed the Cyber and Emerging Technologies Unit. Although this might only appear to be a slight shift, the wording is important.
The fact that the SEC chose to incorporate “emerging” into the title signifies an appreciation for the ever-evolving digital cryptocurrency ecosystem. Some feel that this hints at a greater degree of flexibility; a welcome change for many traders. However, it has also been made clear that such an approach will still aggressively tackle any type of malfeasance.
Good News for Investors?
As Paul Atkins himself stated, the primary goals of these new regulatory approaches are intended to address a handful of key issues:
- To foster innovation
- To increase market efficiency
- To protect cryptocurrency traders
This news should be welcomed by up-and-coming cryptocurrency trading firms, and established domestic brokerages alike. In theory, it could also be much easier for these companies to offer the latest investment utilities, to curate bespoke index trading apps, and to market their services to a customer base that had largely remained out of touch in the past. However, we also need to look at the other side of the equation.
One of the core tenets of the entire cryptocurrency community rests on the bedrock of anonymity. Any notion of centralised governance is likely to be met with stiff resistance by some; especially if SEC oversight reaches beyond its initial borders. This could lead to a slight backlash from the domestic trading community, and we may even witness an exodus to offshore brokerages. However, there is no reason to fully embrace the role of the devil’s advocate just yet.
A Brave New World
The simple fact that the Securities and Exchange Commission recognises the universal appeal of cryptocurrencies is a clear sign that these unique assets are here to stay. Investors should continue to carefully monitor the state of play, and keep up to date with the latest information. The United States government appreciates the benefits of creating novel opportunities for investors, and there is little doubt that the coming years will usher in even more changes.
Whether you happen to be new to the cryptocurrency community, or you are a weathered veteran, it is impossible to deny that this marketplace should enjoy a bright future.