While cryptocurrency enthusiasts argue over which network is the best, a greater question has emerged: does it even matter?
This isn’t a long post, because the concept itself is pretty simple and accessible to most folks who’d stumble across it and read it: the increased liquidity provided by tokenization enables hidden utility in securities whereby they may be utilized as commodity money. This “cash-like” utility is hampered by regulation and conversely, as markets approach the unregulated, assets lose utility through fraud and corporate mismanagement.
When one takes a comparative view of regulatory regimes around the world, at the time of this writing the United States is heading towards this “asset agnostic value” strategy, the most obvious being the declared intent to alter the requirements for accredited investor status. Changing the qualifications doesn’t mean lowering them, but acknowledges that education and intelligence are themselves unrealized profit. A weird flex, but it is what it is.
Class warfare is nothing new but where it has previously been rich vs poor, tokenization of assets under US regulation allows the rich to draft their greatest ally: smart people.
This is okay. It’s okay because any time you increase the size of a population the culture changes and becomes more compassionate as it begins to include the perspectives of new participants and their points of view. It’s the mechanism by which MLK’s “long arc of history” is bent.
Back to the Point
Recent SEC guidelines on the obvious dubiousness of “IEOs” provides a peek into the SEC trying to disparage cryptocurrencies by not properly representing the status of exchanges. The reason for this is very subtle: to do otherwise would require a pronouncement on the asset status of non-security digital assets.
Cryptocurrency which is derived from Bitcoin’s source code are variations on the theme of peer-to-peer electronic cash. Those cryptocurrencies not derived from Bitcoin are derived to emphasise what are secondary effects of how Bitcoin implemented peer-to-peer electronic cash, such as “programmable money.” When one looks at the exact technologies involved and how they are developed, the propensity for one asset designation or the other becomes clear.
Does the SEC know this? Of course they do.
Is the SEC under any obligation to state this publicly? No, they are not.
One might argue that the markets are already a matter of intelligence.
An Exchange Is in the Eye of the Beholder
Going by the SEC guidelines, one might think that an “exchange” consists of only those platforms which allows for the trading of securities, but that’s not the only type of exchange platform. Obviously there are exchanges for gold certificates, physical gold, and foreign currencies. All of them require various kinds of regulation and, guess what, Secretary Clayton’s “true cryptocurrencies” under US law fall into the “forex” category.
This means if a cryptocurrency exchange doesn’t trade securities it can say so, and proudly. My exchange, AltMarket, does just that in our terms of service. We comply with all of the regulations for such a platform. Every asset we trade is vetted for commodity status and the onus is then on the SEC to prove otherwise. Most exchanges cannot take this risk because they do not understand the technology and how the implementation of that technology changes the potential commodity status of any token it may generate.
Connecting the Dots
If true cryptocurrency exchanges are forex platforms, and the barriers for accredited investor status are altered as they have been, there becomes a new potential future. With enough volume across appropriate assets and base pairs, commercial transactions may be made in one asset and settled in another using the fiat price of the goods determining the amount of each value in the exchange. Apple stock may become, to the technologically and intellectually enabled, as liquid as debit card.
We are about one or two steps away from this reality, and it will absolutely become real by the end of this next decade.