A danger to DeFi? SEC Crypto Powers Challenged by Former CFTC Commissioner.
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One of the big battles in crypto right now isn’t between two exchanges vying for supremacy, nor is it two decentralized finance (DeFi) giants vying to be the blockchain. Meta platforms (NASDAQ:META). Rather, it is between two US government agencies. And it’s a contest with huge implications for the future of the crypto-investment world. The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) are both trying to be the lead enforcers in digital assets. The former has taken an aggressive role in regulating the market so far. But a former CFTC commissioner is directly challenging the SEC’s crypto powers.
Brian Quintenz is an advisory partner at crypto investment firm a16z. Before this, however, he held a role as a commissioner at the CFTC. With experience working under the agency, and his current role further entrenching him in the crypto space, Quintenz can speak as an authority on regulations. And he gets pretty vocal about the SEC’s aggressive, litigious approach to crypto regulations and how they could be a heel for the industry.
The way the SEC regulates now, according to Quintenz, “threatens the entire ecosystem.” Over the past two years, the SEC has adopted a pattern of accusing companies of illegal activities, launching probes and taking companies to court. It appears to be hoping to establish a precedent that paints most cryptocurrencies as securities, rather than commodities. If successful, the agency would likely be given the brunt of regulatory duties by Congress.
In an interview with Decrypt, Quintenz expands this way. He says many crypto companies welcome regulations. But they want those that don’t stifle innovation and allow companies to reach their full potential. “You don’t get that out of the SEC.”
SEC Crypto Powers Threaten Crypto Market, According to Former CFTC Commissioner
The SEC’s crypto regulatory party doesn’t seem to be ending anytime soon. But lawmakers are drumming up bills for digital assets. And now it is clear that they have to take a side in the “security vs. commodity” debate. Quintenz argues that these lawmakers have an opportunity to regulate the industry while softening the SEC’s aggressive behavior.
In a nod to the SEC’s practice, Quintenz argues that regulation is a positive thing, “so long as it does not criminalize or punish certain activities that are based on a highly ambiguous standard that a regulator has not clarified.”
He adds that this depends on lawmakers’ knowledge of cryptocurrencies. The better their knowledge, the more effective these laws are expected to be. Also, more savvy lawmakers will spread fear among crypto companies of harsh retaliation over innovation.
One of the biggest things lawmakers need to do before creating regulations is to split jurisdiction over the space between the SEC and the much more crypto-friendly CFTC. One of the most popular crypto bills right now, Senator Cynthia Lummis’ crypto bill, would give the CFTC most of the power, as it would treat a majority of the world’s crypto commodities as commodities and only a few as securities.
Under this bill, crypto companies would be more likely to see a future like the one Quintenz calls for. The CFTC has taken a more cautious and learning-based approach to the market, a move that has been praised by crypto figures. CFTC Chairman Rostin Benham has even predicted that the crypto price could double under the CFTC’s watch. This has added to the calls to remove regulatory duties from the SEC in favor of the CFTC.
At the date of publication, Brenden Rearick did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to the InvestorPlace.com Publishing Guidelines.
