The lack of regulatory clarity in the crypto space over the course of the past few years has been highly frustrating for many investors.
Some investors want to participate in the space but aren’t willing to do so until the legal status of many aspects of the industry have been clarified, and other investors are simply not willing to take such a large risk when there is no degree of certainty over how funds ought to be custodied and what checks and balances are in place (as with FTX).
Gensler announces that everything other than Bitcoin is a security
Gary Gensler has now provided some much-needed clarity to the industry by reiterating what he has been saying for well over a year now, that everything other than Bitcoin is a security and decentralised in name only (DINOs).
Gensler recognises that Bitcoin can be treated as a commodity, since the lack of governance means that any significant protocol changes are nigh on impossible (as demonstrated by the block size wars).
“Everything other than bitcoin,” Gensler told me, “you can find a website, you can find a group of entrepreneurs, they might set up their legal entities in a tax haven offshore, they might have a foundation, they might lawyer it up to… https://t.co/3wNrnNLKmi pic.twitter.com/vZMtMSndp1
— Cory Swan.com #Bitcoin WORKS (@coryklippsten) February 26, 2023
Ethereum advocates, for example, will often contend that the blockchain is highly decentralised, despite the fact that 70% of ETH was pre-mined before the ETH presale (which the Ethereum Foundation has been gradually dumping over the last few years), and currently only three entities control over 50% of validators.
Will he cripple the US crypto industry?
The clarity of recognising that Bitcoin is a commodity thanks to its “unique origin story” and that everything else is a security thanks to its higher level of centralisation, means that Gensler is not wrong to take this position.
Other than Bitcoin, every major crypto asset has insiders that have the ability to change the rules, and governance structures that are inherently centralised.
This will not cripple the US crypto industry. Countries such as El Salvador have already made it clear that anything other than Bitcoin is a security, and their economy has been booming as of late thanks to their regulatory approach. The US has never been the friendliest country to crypto, but the real issue has been the lack of clarity over what ought to be permissible and what ought not to be.
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