How Can Digital Assets Be Brought Into A Regulatory Framework?
The Chairman of the SEC Gary Gensler gave a very informative interview on Tuesday, with David Ignatius at Washington Post Live. Despite the comments, the problem with the interview was not Gensler, but David Ignatius’ journalism:
Third question: "What can you do with the authority you have, and what would you like to do?"
Fourth question: "Would you like additional congressional authority to regulate in this sphere?"
Fifth question: Do you need additional Congressional authorization to bring these under regulation?"
Sixth question: "If you institute the regime, wouldn’t people would find new ways to escape scrutiny?"
A respected journalist at one of the top media outlets in the world, who is conducting an interview about crypto, must ask some questions about… crypto. His job is to be unbiased, to do his research, and all he can ask is leading questions?
To my mind, Gensler has seemed to be a fair and proficient orator on these topics. Even if we are inclined to distrust federal government and/or disagree with Gensler’s politics, we can respect his diligence in learning and teaching on this topic at MIT.
Despite Ignatius’ leading questions, Gensler went out of his way to say at the outset that he likes the distributed ledger technology a lot. He speaks favorably about the way it is has challenged central banks and payment systems around the world, innovated in conventional business models, and driven improvements in fintech and peer to peer lending. These statements indicate that he believes such challenges to central banks and to the banking sector are both necessary and for the better. He just wants to see this change to happen within a public policy framework (apparently so there’s not spill on aisle 3).
Anyone wants to see the space grow past $2 trillion market cap to $100 trillion plus, understands that the ship has sailed on regulation, and that bringing digital assets within a regulatory framework is inevitable and necessary.
The best strategy that we can take at this point is to be proactive and ensure that regulation happens on agreeable terms. We understand the reality and the true value of the space, and they do not yet. This much is clear from the SEC’s inexcusable handling of the recent situation with Coinbase, to which Gensler had an inept response.
So what is the best way to bring digital assets under a regulatory framework? It is going to require much more than a legal framework. The digital asset economy requires a new understanding of economic theory.
Regulators have to show that they understand the position of retail digital asset investors. The common person in the United States is completely locked out of the highly concentrated power and wealth institutions: the Wall St. financial system and the Silicon Valley technology sector. These are near monopoly sectors that exclude financial participation from the vast majority of everyday Americans. How many average Americans can work at Google, Facebook or at Goldman Sachs?
I can tell you from personal experience, that working as a driver associate at Amazon is horrible. I worked fifty to sixty hour weeks, during 6 months of the pandemic, $16/hour, delivering anywhere from 100-250 packages a day. No coming back until they are all delivered, which could take up to twelve hours. The whole operation is based on everyone constantly consulting their cell phone app and barely speaking with each other. To put it bluntly, working at Amazon is like working inside an artificial intelligence-based Franz Kafka novel. It’s not a liveable work situation.
On top of being locked out of financial participation, there are systemic problems with the tech and financial sectors, including privacy concerns, censorship, manipulative gamification practices, corruption, and monetary inflation. That is the despairing situation of the retail digital asset investor. Everyone wants a better financial system. No more games!
The only sufficient long term regulatory framework will be from crypto-native distributed governance. The best strategy would be to use the NFT market to incentivize distributed research that converges to the optimal public policy framework for the digital asset participants, and drives significantly better education in Washington for understanding the space.
Continued in Part II…