Economist Criticizes SEC For Potentially Putting Crypto Out of Reach of Middle-Class Investors

John Berlau, an economist at the libertarian think tank Competitive Enterprise Institute. recently published a paper on April 11 criticizing the United States Securities Exchange Commission’s approach to regulating the cryptocurrency industry.

Berlau’s paper, titled “Cryptocurrency and the SEC’s Limitless Power Grab: Why Speculative Consumer Goods Are Not ‘Securities,'” accuses the SEC of stunting innovation in the cryptocurrency industry.

In the paper, he states that blockchain technology and cryptocurrencies are transformative and innovative, but entrepreneurs haven’t been able to experiment and utilize the technology due to the SEC’s constant crackdown on cryptocurrencies.

The SEC’s Approach to Cryptocurrencies Could Harm Blockchain Functionality and Retail Investors

Apart from the SEC’s stifling approach to cryptocurrency and its innovation, Berlau argued that their approach could even threaten the functionality of blockchain technology if cryptocurrencies were to be labeled as securities.

Adding to this, he said this would in turn harm retail investors as well, stating:

“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.”

Moreover, Berlau criticized the SEC’s Howey test, which is used to classify whether an asset is a security or not. He believes that many cryptocurrencies should be exempt from securities law because if they’re labeled as a security, it could potentially threaten the entire crypto’s functionality and use case.

However, as previously reported by IIB, there may be hope that the SEC exempts cryptocurrencies from securities law if a new bill proposed by US Congressmen Warren Davidson and Darren Soto amends the Securities Act of 1933 and the Securities Exchange Act of 1934 to exempt cryptocurrencies.

Do you think the SEC will label many cryptocurrencies as securities? Or will they come out with a positive regulatory framework for crypto and exempt cryptos from securities law? Let us know what you think in the comment section below.

1 Comment

  • William Ziemek
    Posted April 13, 2019 7:01 pm 0Likes

    I don’t think the SEC has any intention of relaxing any rules that would have immediate benefit to small investors. As with IPO’s, the SEC will continue to restrict small investor participation in ICO’s under the guise of protecting us from ourselves, when in reality all the SEC is doing is restricting access to the opportunities to realize enormous profits to be made from ICO investing to those already having substantial wealth. ANY securities’ investment carries risk. A truly beneficent SEC would prohibit any small investor participation in securities trading consistentwith their stated intention.

Leave a comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.