SEC Commissioner Says SEC Should Not Coddle American Investors

In a refreshingly rational and candid speech, SEC Commissioner Hester M. Peirce recently drove home a point that our team has been making for years: Laws and regulations in the cryptocurrency markets should be implemented to punish actual convicted criminals, not to coddle American citizens by arbitrarily picking and choosing which cryptocurrencies and crypto-based products are allowed to be offered to citizens.

Neither America's Founders nor the American people as a whole ever intended U.S. Government regulations to become the equivalent of toddler water-wings for American investors. This paternalistic tendency of regulators exists for political reasons, not because there is anything exceptionally dangerous about cryptocurrencies. Politicians "err on the side of caution" in this case to protect their jobs and campaign financing streams from banks that don't want cryptocurrencies to flourish. Whether citizens are protected by their paternalistic regulations or not is incidental to their career ambitions.

How do we know this is true? Because options and derivatives trading and many of the other investment products peddled by Wall Street firms every day are just as dangerous—and often more dangerous due to leveraged accounts—than any cryptocurrency today. And these products are freely available to everyday citizens, even without being so-called accredited investors. If politicians really cared about the welfare of citizens, they would be focused on fixing the much deeper structural economic problems that cause Broken Capitalism today, not colluding with gigantic banks to thwart innovation in the cryptocurrency markets.

SEC Commissioner Peirce uses the analogy of speed limits for automobile drivers. This is a good analogy, which I also used in our Broken Capitalism book a couple years ago. The purpose of a speed limit is to give drivers the ability to move through the geographical landscape freely as long as they don't engage in reckless behavior that would hurt other drivers. Speed limits cannot prevent drivers from speeding off a cliff and hurting themselves. If people want to engage in self-destructive behavior that doesn't hurt others—that's their right as citizens living in a free society. But preventing citizens from purchasing cryptocurrencies from ICOs and causing the cryptocurrency markets to become even more centralized than the fiat banking system is completely unacceptable in a democratic republic.

SEC Commissioner Peirce understands how to balance the need for a society to nurture innovation while simultaneously discourage criminal behavior. We encourage all Gini stakeholders to read the full text of Commissioner Peirce's speech, write your elected officials, and tell them to read her speech if they want to understand how a rational cryptocurrency regulatory regime should be implemented.

It's important to understand that the SEC, CFTC, and all government regulatory agencies in every country are staffed by impressionable humans, each of which has a world view that is defined by their own philosophical beliefs, ambitions, and life experiences. As mentioned on our Gini Books List, the human brain is born as a blank slate; it must be filled with accurate knowledge and meaningful life experience before it can do anything useful. This is true for politicians and regulators, too.

Commissioner Pierce is our favorite "CryptoMom" because she has shared principles in her speeches and papers that we have also shared in our books and articles many times over the years. Unfortunately, she is only one voice within the SEC. She needs our support and the support of all Gini stakeholders to help her persuade her colleagues in government to embrace our shared values and perspectives.

As technologists, economists, and business leaders with decades of experience building innovative financial services for real-world commerce, we believe one of the most important roles for the Gini Foundation is to be a nonpartisan source of sanity and inspiration for regulators and policymakers. Very few technical teams have as much real-world, nonpartisan, technical experience as the Gini team across the key domains of financial services, economics, and geopolitical affairs, along with an authentic and proven nonprofit spirit that emphasizes sustainable and equitable economic systems.

We hope Gini stakeholders recognize this important dimension of our mission and appreciate that high-quality analysis and nonpartisan outreach to regulators and policymakers takes time and resources. This is another reason why stakeholders should participate and support Gini's important mission.