Bitcoin and the cryptocurrency industry are in the eye of a storm. As more people enter the cryptocurrency space, the first cryptocurrency by market cap has drawn the attention of regulators and politicians.
This has resulted in a subtle push between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) (CFTC).Gary Gensler, the chairman of the Securities and Exchange Commission, wants more authority to regulate the cryptocurrency market.
Raoul Pal, a former Goldman Sachs executive, commented on a recent speech given by Gensler, another former Goldman Sachs employee. Pal believes the SEC Chair is “laying down the hardest case” to try to classify and regulate most cryptocurrencies as securities.
Only Bitcoin and Ethereum are currently classified as commodities in the United States, but even this has been contested under Gensler’s leadership. Pal compared the current state of the crypto industry to the early days of the internet in this regard.
According to the former Goldman Sachs executive, at the time, authorities attempted to impose rules and laws in order to gain more control over the emerging sector. They eventually failed, allowing innovation to produce one of the most significant events in financial markets for the United States. Pal stated:
This decision resulted in trillions of dollars of new capital being created and the largest investment inflows into the United States in history. The innovation that resulted from the internet’s light regulation changed the world, with the United States leading the way.
As a result, former Goldman Sachs executives asserted that future regulation of Bitcoin and cryptocurrencies will be “much lighter than today.” The crypto industry is one of the world’s fastest growing, with an all-time high market cap of around $2 trillion.
Why Could The SEC Change Its Rules To Favor Bitcoin And Crypto?
If the SEC Chair and politicians in the United States exert a stronger hand in the crypto market, companies that rely on Bitcoin and digital assets to operate may leave the country. This could result in a capital exit that is equal to or greater than what occurred when the internet first appeared.
Pal also stated that the industry is gaining political clout. Throughout 2021, many former public employees have taken positions in crypto exchanges and other companies in this industry.
As a result of the foregoing, regulators and political actors will be able to create a new regulatory framework that will reduce execution costs, be more efficient, and be fair to those looking to enter the crypto market. Pal stated:
(…) This also implies that the frankly ridiculous rules governing Accredited Investors and the sale of securities MUST be updated to reflect the modern world, not the 1930s world. It is simply inexcusable to allow the rich to get richer while penalizing the poorer people who do not qualify.
In support of his claims, Pal stated that the current political climate will make it difficult for regulators to prevent people from investing in Bitcoin and other cryptocurrencies. Everything, however, will be decided in the next 3 to 5 years.
Countries with a more relaxed and welcoming attitude toward cryptocurrencies and Bitcoin will fare best during this period. Pal speculated that the SEC Chair may be employing a “classic negotiation” strategy by beginning his mandate with a tough stance only to later “compromise.”