The US Securities and Exchange Commission (SEC) came under fire recently from John Berlau over its strategy in regulating cryptocurrencies.
Berlau, a fellow at Competitive Enterprise Institute, had some strong words against the SEC’s approach in the report “Cryptocurrency and the SEC’s Limitless Power Grab: Why Speculative Consumer Goods Are Not ‘Securities.’”
Berlau asserted that cryptocurrencies and blockchain technology are innovations with the massive potential to transform the industry. However, their promise is being curtailed by the government’s “burdensome regulation.”
He also said that there’s no bigger threat to the two technologies than the SEC. Berlau then claimed that the US government’s increasing control over cryptocurrency and blockchain stops entrepreneurs from developing and testing new applications and strategies.
The libertarian thinker also argued that the scrutiny the securities commission places on blockchain technology could hamper its functionality, especially if it’s labeled as a “security.” He added that the regulatory approach being used on digital currency can harm investors.
Berlau explained in his report that categorizing cryptocurrency as a “security” could place it “out of reach of middle-class investors” due to the red tape generated by SEC rules and financial regulations like the Dodd-Frank Act of 2010 and the Sarbanes-Oxley Act of 2002. These laws have also limited the access small investors have to stock in companies in early stage growth.
The cryptocurrency report also took potshots at the Howey test utilized by the Supreme Court and the SEC to determine if transactions can be classified as “investment contracts.” According to Berlau, the test provided the agency with the means to control many cryptocurrencies as securities. This then allows the commission to enact more serious measures against cryptocurrencies over other investments.