The crypto industry has faced significant regulatory oversight in the past 6 to 12 months, but regulators have not been kind (to say the least). Last week, Coinbase announced that the SEC plans to take legal action against the company if they launch the LEND product (which would allow users to earn 4 percent on USDC stablecoins). This move from the SEC is very bizarre and unclear.
The question arises as to what motives lie behind the SEC? Numerous crypto enthusiasts will readily say that regulatory agencies like the SEC are heavily influenced by traditional financial institutions. Why else would they take such outrageous legal actions against American crypto companies? Financial powerhouses have an existing hierarchy of political power, significant lobbying resources, and the entire traditional financial system behind them. They are the sharks in a school of fish, at the top of the food chain. And unfortunately, as pathetic and unfair as it may be, these regulatory agencies wield significant power and can cause serious short-term damage to the entire crypto ecosystem if allowed to enact draconian laws and pressure the industry to essentially ‘adapt or die’.
What is actually ironic and, in a way, sad is the fact that American politicians like Senator Elizabeth Warren refer to the crypto ecosystem as a new ‘shadow bank’. Such statements indicate an extremely poor level of education, but most likely politicians do not even want to learn how blockchain works and deliberately use catchy phrases in media addresses.
– Cryptocurrencies are used only by criminals and terrorists. Bitcoin is nothing more than another bubble, like tulip mania – just some of the common expressions.
The real shadow bank is the opaque, closed, and unfair traditional financial system that exists solely to enrich a few at the expense of many. Meanwhile, DeFi is decentralized, transparent, open, permissionless, and allows everyday people to break free from the chains of centralization. But of course, the current powers do not want that; they want to keep your money in a ‘safe’ bank account that earns a miserable interest rate of 0.1 percent per year while inflation erodes your savings and everything around you becomes more expensive.
The funniest thing about all this is that no one in the crypto ecosystem is asking for such laws, nor are they asking these agencies to ‘protect’ them. From the perspective of many crypto companies, regulatory clarity and cooperation are the only things that matter. What is even more unusual is the current state of the crypto market where the SEC may have its hands full with frauds, rug-pulls, and Ponzi schemes, but they prioritize after honest companies like Coinbase and Uniswap Labs. So, it is not really about protecting retail investors; it is about intimidation tactics and stifling innovation so that current institutions can maintain their positions of power for as long as possible.
I think what politicians and regulators are mistaken about is the data on how large the crypto ecosystem is now. The crypto community is no longer small and niche. Research, surveys, and data speak for themselves. In June at the Hanfin Fintech conference, the main news was that in the small country of Croatia, investments in the stock market and cryptocurrencies were equal this year. Trading volumes on crypto exchanges are growing exponentially, and there is a strong possibility that crypto volume will surpass that of the stock market, especially if Bitcoin reaches and exceeds its previous peak of $64,000 again. I believe that the discussion around the American infrastructure law was a wake-up call for politicians and regulators not only in the U.S. but globally.
