Felix Pinkstone
February 4th, 2025 14:18
The application of the SEC of traditional market rules to Crypto has sparked controversy. Coordinated regulations have been proposed to address Crypto’s unique capabilities and to encourage innovation while ensuring investors’ protection.
The Securities and Exchange Commission (SEC) faces criticism of how traditional market rules are applied to the rapidly evolving cryptocurrency sector. According to A16Z Crypto, this approach is seen as counterproductive in promoting innovation and ensuring investors’ protection.
The challenges of applying traditional rules to cryptographic codes
The SEC’s historical approach, often referred to as “enforcement regulations,” involves extending existing securities rules to new technologies such as blockchain and crypto assets. This method has been criticized for its lack of clarity and its adaptation to the unique properties of cryptocurrency. Traditional rules designed for traditional securities markets do not always align with the decentralized digital nature of blockchain technology.
Custom order regulations are required
There is a growing consensus that the SEC should adopt a bespoke regulatory framework tailored to the crypto industry. Such regulations take into account clear characteristics of crypto assets such as iconic securities and distributed financial (DEFI) products that are significantly different from traditional financial instruments, such as iconic securities and distributed financial (DEFI) products. Masu.
Current regulatory proposals, such as best practice rules and protection regulations, highlight the challenge of adapting cryptography to existing frameworks. These rules are primarily designed for traditional markets, fail to take into account the operational dynamics of cryptographic devices, leading to confusion and potentially stifling innovation.
Proposed approach for effective regulation
Industry experts suggest that the SEC should work with Crypto leaders to gather market data and insights. This collaboration not only protects investors, but also helps in creating rules that address the innovative nature of cryptocurrency. The SEC’s approach to security-based swap after security-based swap, which exempts certain market participants from the registration requirements, is cited as a successful example of coordinated regulations.
Additionally, the SEC recommends using existing tools such as Exchange Act Rule 10B-5 to deal with fraud and operations rather than impose inappropriate rules. This approach could prevent regulatory overreach and promote a balanced environment for crypto innovation.
Conclusion
The discussion on creating SEC rules underscores the need for a nuanced approach to cryptocurrency regulations. By recognizing the unique attributes of the Crypto market and working with industry stakeholders, the SEC can develop a framework that ensures investors’ protection while promoting technological advancements.
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