By John Deaton. August 21, 2022. (FOX Business).
The Supreme Court may have recently struck down overreach by the Environmental Protection Agency, but at the Securities and Exchange Commission, chairman Gary Gensler remains undeterred in expanding the agency’s power beyond its constitutional boundaries.
For proof, you need no better example than his all-out assault on the cryptocurrency space.
It doesn’t take a constitutional law expert to understand that the SEC has limited jurisdiction over the crypto industry; barring congressional action, front line regulation of digital assets belongs with the Commodity Futures Trading Commission – the main regulator of investments that are not deemed traditional securities.
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By Curt Levey. August 1, 2022. (The Federalist Society)
With the rapid growth of cryptocurrencies have come increasing calls for its regulation and both uncertainty and overreach concerning the applicability of existing rules. If Congress doesn’t address the regulatory confusion, that job may fall to the Supreme Court.
Most of the attention has focused on the Securities and Exchange Commission, which has sued a number of companies in the cryptocurrency field, citing its authority to regulate securities under the 1933 Securities Act and the 1934 Securities Exchange Act. But that’s quite a stretch. Unsurprisingly, those 90-year-old statutes did not include anything like crypto—that is, digital assets existing only on a decentralized ledger (the “blockchain”) that’s distributed across disparate computers—in their definition of a security.
Instead, the Acts defined a “security” by listing well-understood examples, such as “stock” and “bond,” then adding a catch-all term, “investment contract.” Because cryptocurrency is not among the examples, the SEC argues that crypto is sometimes an investment contract.
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By Roslyn Layton. May 18, 2021. (Forbes).
The regulatory future of cryptocurrency seems destined to be decided by the courts, thanks to an ill-conceived lawsuit filed by the Securities and Exchange Commission. If Ripple’s arguments prevail in the Southern District of New York and on appeal, this case could give the Supreme Court a chance to review the 1946 Howey decision which set a standard for what constitutes a security.
I’ve covered the SEC’s case against Ripple Labs case since it was filed by the SEC in December 2020 because it had all the hallmarks of classic enforcement overreach. Ripple and cryptocurrency investors have fought back with robust arguments while the SEC has stumbled and exposed its former leaders’ troubling conflicts of interest. It looks like something bigger than a mere lawsuit. The historical moment adds urgency to resolving whether XRP is a currency or security, a question which financial innovation makes difficult, but also demonstrates the SEC’s abuse of its authority.
The total market cap of all cryptocurrencies, including the XRP digital token at the heart of the Ripple case, tops $2 trillion dollars. The sum of these digital assets is now worth more than the total number of U.S. dollars in circulation. Global companies like Goldman Sachs and PayPal are racing to adopt the technology for consumer products. But more ominously, China has already rolled out a central bank digital currency (CBDC) called the Digital Yuan for domestic commercial and consumer use on a big scale. Mastercard has opened talks to act as a financial bridge for China to expand the Digital Yuan’s global network, export its applications and compete against both cryptocurrencies as the U.S. dollar in the emerging digital economy.
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