[Insight] The Digital Asset Market Welcomes ‘Regulation’
“Digital Assets including Bitcoin are brooding new issues related to investor protections which are requiring the intervention of the financial authorities. Stimulating new technologies are important, but what is more important is to ensure the protection for investors.”
Gary Gensler, a nominated candidate for the first chairman of Securities and Exchange Commission (SEC) under the Joe Biden executive, said like this on the confirmation hearing held by the U.S. Senate Banking Committee. This has stirred the digital asset market greatly. The anxiety brewed by the concerns that Candidate Gensler may threaten the digital asset market and the related business with the edge of the blades in the near future is now causing adjustment of the Bitcoin’s price.
After he resigned from the chairman of Commodity Futures Trading Commission (CFTC), Candidate Gensler has been teaching Blockchain technologies and digital assets at the Massachusetts Institute of Technology (MIT). In his external lectures, he used to say, “Though it must be hard for Bitcoin to replace gold that we have been preferred for centuries, right now, Bitcoin is now becoming one of the methods for storing value. In this point of view, we can call Bitcoin a digital gold in a most modern form.” Thus, Gensler was considered as one of the most iconic digital asset-friendly personnel. And that is why people are disappointed, believing that he had betrayed the market.
But to make a long story short, such concerns and interpretations are overly exaggerated. It is important to understand the entire comment by Candidate Gensler to the fullest, not in partial. First, he represented digital assets as a “catalyst for changes.” That is to say, he forecasted that digital assets and blockchain technologies on their basis can bring a huge impact on the financial system. And that is why he has shown his high appreciation by saying, “Digital assets including Bitcoin have brought a new perspective for making payments.” In that regard, he also promised that he will bolster the technology related to digital assets and blockchain.
As for the existing digital assets, Gensler said, “It is important for SEC to provide guidance and clarity (for digital assets).” He added, “Such a clarity may receive both applause and criticism at the same time, but providing it is an important thing.” What he is aware of is not digital assets. In his point of view, what is problematic right now is that the financial authorities are not giving clear instructions for digital assets. And that is why providing protections for investors (who are investing in digital assets) could be a problem.
In the meantime, Candidate Gensler speaks a bit further in detail. He said, “If the digital assets that are in trade within the exchanges are related to securities, I would like to provide clear and proper protection for investors in the name of SEC.” That is to say, if some digital assets can be considered as ‘securities,’ he is planning to protect investors with the proper Securities and Exchange Act as the head of SEC, who is in charge of the entire Securities and Exchange Act.
From this point of view, Bitcoin (BTC) and Ethereum (ETH) are not posing any problems. As for Bitcoin, it cannot be viewed as security since there is no private company that has issued the digital asset, and is already in use as the partial method for value exchange. Plus, SEC itself had already proclaimed that “Bitcoin and Ethereum are not securities” a few years ago.
The main point of this matter will be Ripple (XRP) that has been accused by the SEC of violating the Securities and Exchange Act, under the charge of “funded its capital without registering to the authority, even it is a digital asset security.” At one lecture in 2018, Candidate Gensler said, “There are strong proofs that are pointing out that digital currencies issued by companies may have violated Securities and Exchange Act.” According to his claim, most of the issuance and funding made under the name of Initial Coin Offering(ICO) can be the target of the Securities and Exchange Act, which means the implemented cases cannot escape from the supervision of the SEC.
However, since Candidate Gensler has been showing his high expectations towards the value of digital assets, it is clear that he will focus on creating rules for providing protections for investors from any unexpected circumstances rather than spoiling the entire market and business. When he was the chairman of CFTC, he was in conflict with the financial firms in Wall Street for introducing regulation policies against the complicated derivatives that had caused the global financial crisis. However, it was also under his incumbency that the derivative market in the U.S. had grown more than before.
The markets are always afraid of ‘lack of regulation’ rather than ‘regulation’ itself. They can find a detour to avoid the regulation if it’s visible. But the regulation that is not in present is a huge uncertainty by itself. If Candidate Gensler can provide some clear instructions for regulation, it will provide a basis for other new projects to emerge and grow.
*This research and analysis document has been prepared for the purpose of providing information that can be used as a reference based on our reliable data and information, but we cannot guarantee its accuracy or completeness.
*The document has reflected the individual’s opinion, and it may not be consistent with the company’s official point of view.
